The Intelligent Quarterly from the publishers of The Insurance Insider

Summer 2013

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Coverholders are an important source of business for Lloyd's and the London market in general.

Their numbers have increased steadily in recent years and there are now over 2,500 Lloyd's coverholders alone producing 30 percent of Lloyd's premium income each year.

This significant source of income for the market needs careful management. At JMD we administer over 2,500 binders generating almost £1bn in estimated annual premium income on behalf of our clients and have seen at first hand the varying quality of data being supplied at present.

While insurers are careful to vet coverholders before commencing a relationship, the comprehensive management of these coverholders and their performance is vital to ensuring long-term profitability and minimising exposure to bad debt.

To ensure binding authorities are being effectively managed both from a regulatory and a performance and operational perspective, there is an ever-growing requirement for further reporting at a granular level. The demands on all parties involved can become costly and onerous if not controlled and managed in an efficient and cost effective way.

While the insurer is ultimately responsible for gathering adequate management information it is also engaged in a partnership with the coverholder and broker, and therefore a practical solution that eliminates duplication of effort and enhances efficiency is of paramount importance.

Quality information
Who is requesting this information and who is pulling this information together? In our experience, this work is being undertaken by various departments within the same insurer and by each insurer under the same binding authority. Does this additional pressure to supply information make brokers and coverholders reluctant to improve the quality of the information provided?

And is not the key to getting this improved quality the ability to capture as much information as possible and to use a single entity to collate the available data?

Streamlining the process provides a far more comprehensive reporting platform by combining the various sources of information. The best solution for all is to use a single provider and system to collate this information; it can be integrated into the multiple in-house systems without duplicating the mapping and uploading of the data.

This will free up significant time and resources to focus on improving the quality of the data being made available, which will improve reporting and performance. This is surely a more cost effective and efficient process for all parties concerned.

Monitoring risk
The timely and accurate production of bordereaux, the collection and payment of premium within settlement terms and the verification of claims are all important components.

Of equal or possibly greater importance is the monitoring of risks written under the binding authority and how quickly they appear on a written bordereau and subsequently flow through to a premium bordereau. The added value of a compliance check to ensure the coverholder is operating within the terms of business is also a vital component of good monitoring.

It is with this in mind that we have found that insurers are turning to specialist providers to assist them with this myriad of administrative tasks. The combination of specialist systems and the analytical skills of staff at these providers are providing the tools and reporting functionality for insurers to best assess coverholder performance.

The key to effective binding authority management is therefore not just relying on brokers and coverholders to supply fragmented data on an ad hoc basis, but rather to collect information centrally and to convert it into a meaningful reporting suite that gives every party the ability to drill down into that data. In this way the efficiency, quality and profitability of the coverholder can be clearly demonstrated.

Colin Johnson is CEO of JMD Specialist Insurance Services, part of the R&Q Group