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MRG Endorsements Roll-Out S. Dean, 27 th Sept 2007

MRG Endorsements Roll-Out S. Dean, 27 th Sept 2007. Content. Background Project Summary Approach to delivering Endorsement initiatives Market Reform Contract – Endorsements Electronic Endorsements roll-out of (e-mail) revised process Benefits/success/risks and issues – “business case”

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MRG Endorsements Roll-Out S. Dean, 27 th Sept 2007

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  1. MRG Endorsements Roll-Out S. Dean, 27th Sept 2007

  2. Content Background Project Summary Approach to delivering Endorsement initiatives • Market Reform Contract – Endorsements • Electronic Endorsements roll-out of (e-mail) revised process Benefits/success/risks and issues – “business case” Next steps

  3. Background • Endorsement is generic term for all mid-term contract changes from simple vessel name change to adding a construction project for Olympic development in London • Endorsement is a binding agreement on insurers and policyholder and has to be evidenced in writing • There are on average 3 endorsements for every contract, they can be administratively ‘heavy’ and in the London Market, many agreed by a face-to-face ‘broke’ • Clients can regard them as ‘hygiene’, ranking them below policy issuance and claims negotiation in importance/value • Goal is therefore to reduce time and effort spent of agreeing endorsements and reduce turnaround time from the insured’s instructions to confirmation to the insured of agreement

  4. Project Summary • Endorsement project is part of the placing component of the Market Reform Vision and forms one of the market projects for 2007 and 2008 • Objective: Develop standardised documentation and electronic messaging for endorsements; • Initial phase: Streamline documentation and handle by remote delivery, e-mail for now, focus on less complex endorsements • Project launched (mid) May 2007 and effectively ran to end-August with continuation of ramp-up for participants from 1st Oct 2007 • JLT, Marsh, Miller and Willis – ‘Direct’ classes, Aon using Ri3K • Core no. of Insurers signed up, now getting ad-hoc take up • Expanded into Marine, Construction, Property, and Financial Risks. Reinsurance focus is in G6 endorsement messaging pilot

  5. Project Summary….general changes • Honeycomb style removed and replaced with new-style Endorsement with recommended and optional section and data field guidelines • This new style Endorsement is created at the beginning of the process and is attached to an e-mail which acts as the distribution mechanism to Markets and can be used as an Insurer Authorised document • Revised Agreement Process caters for: • E-mail request and (re)insurer response with e-mail agreement/instruction • E-mail request and (re)insurer response with scanned attachment of a stamped or signed copy of the revised Endorsement returned to the Broker by e-mail • E-mail request and (re)insurer prints and signs Endorsement attachment and returns by Mail Post – (Client instruction)

  6. Project Summary…changing Documentation ENDORSEMENT UMR: B123412345678 Endorsement Ref: 001 Type: All Risks of Physical Loss or Damage Reinsured: ABC Insurance Ltd Original Insured: XYZ Ltd The contract is amended as follows: Effective Date: 00.01 hours 1 August 2007 local standard time as the location of the property insured Situation: Amended to include the insured’s location at: 1 Lime Street London EC3M 7HA Sum Insured: GBP 100,000.00 any one loss in respect of the above location Premium Additional Premium due in respect of these changes is GBP 100.00 Tax payable by insured 5% Insurance premium Tax and administered by Insurers All other terms and conditions remain unchanged.

  7. Project Summary…e-mail template • From: Dean, Stuart Sent: 30 July 2007 10:48To: 123 underwriting • Subject:ABC Insurance Ltd / B123412345678 / End001/lead • Effective Date: 1 August 2007 • Your Ref: ASDF1234 • Please find attached an endorsement request from ABC Insurance Ltd. As Slip Leader you are being requested for a formal response to this endorsement. Response request: • Agree  • Decline • Request negotiation • If your response is "Agree", please send us by e-mail your agreed response and Leader response to the GUA details below: • GUA Details:         GUA present on slip:  Yes • Leader Response:  • Part One:                Y/N                                   • Part Two:                  Y/N                                       • Part Three:                Y/N                             • If you have any questions, please contact the undersigned.   ACORD Standards

  8. Pilot – Lessons learnt • Received enough feedback and interaction to recommend continuation of project • Requires cultural/behaviour change, internal organisation changes, decision on how brokers and insurers will agree ‘electronically’ • Removing Honeycomb and replacing with Endorsement document enabled use as Insurer Authorised Document – this proved popular • E-mail distribution (not surprisingly) is easy – businesses already doing this to and from international destinations • Should have focussed more heavily on one class of business and got regular volumes to insurers • More complex Endorsements will still require elements of negotiation and face-to-face contact

  9. MRG Response • The work should no longer be referred to as a pilot but should seek to transition to a phased market roll out; • For brokers and insurers already involved in the pilot this would mean a concentration on ramping up volumes; • For those firms yet to get involved, the focus would be on enabling them to do so; • The work necessary to extend the process beyond the current business classes would be progressed; and • The project (group) would revert to MRG in September with a proposal for the phased market roll out.

  10. Approach to delivering Endorsements initiatives • The work will be split into three main initiatives: • The introduction and implementation of Market Reform Contract – Endorsements (MRCE) standards to mandate the form and use of Endorsement documentation and agreement methodologies. This will be rolled-out to all market participants during Q4 2007. • The introduction and implementation of revised remote agreement process using e-mail agreement and other messaging communications on a phased basis by class of business and product segment. This will start in Q4 2007 and continue through 2008. • To co-ordinate endorsement activity with other Market forums with particular emphasis on input and adherence to ACORD standards for Endorsements and compliment the work of the MRG/LMA Electronic Placing Group. This will be accomplished via the Endorsements Steering Group as part of its general remit.

  11. MRCE – Market Reform Contract Endorsement Aims of the MRCE (in draft form for consultation and agreement) • To standardise the endorsement format irrespective of method utilised to broke the endorsement, e.g. paper, e-mail or ACORD messages to facilitate CONTRACT CERTAINTY • To revise the endorsement process by changing and streamlining documentation and standardising agreement methodologies MRCE Layout • Revised document sections following MRC principles • Examples in the guide Evidencing Agreement • A copy of the MRCE • A formal policy endorsement document • A Broker Insurance Document (BID)

  12. Electronic Agreement Process Project focus The MRCE is designed for use with different types of agreement methodologies including today’s face to face process: Electronic processes: • The MRCE can be attached to an e-mail and the insurer responds by e-mail, attaching a scanned, signed, stamped MRCE. Alternatively, rather than scanning the MRCE, the Insurer may respond by email confirming their agreement within the body of the return email • The MRCE is attached to an e-mail or e-message, where the e-mail or e-message forms part of an application. The insurer is likely to be able to respond either with an electronic signature or with a scanned signed MRCE • The MRCE is used as part of an ACORD standards based messaging process. This may either be via direct peer-2-peer connection, via a hub for routing or via a trading service • The remote processes shown are not definitive. However, the most important facet of remote agreements is to be able to produce from it, directly or indirectly, either an Insurer Authorised Document (IAD) or a Broker Insurance Document (BID) in a compliant way

  13. Project Recommendations Recommendations to MRG for approval • That a MRCE (Market Reform Contract Endorsement, defining market-wide endorsement documentation) be prepared for agreement for end-October 2007. This will be rolled-out to all market participants; • That the project establishes remote agreement processes together with market representatives during Oct/Nov 2007; • That the project organise the roll-out of remote agreements on a class by class basis from October 2007; supported by recommending: • the initiative continues with the pilot classes of Marine And Property classes first; • that one-to-one remote agreement process be used on non-complex, single agreement party contract changes from Oct 2007. • that organisations measure internally and report to MRPO, via Market Associations, the percentage of endorsements sent electronically for remote agreement to monitor take-up progress; and

  14. Benefits Matrix for MRCE and Remote Agreements

  15. Benefits Accumulation These may be interlinked Data Integration Application/ Platform Benefits Accumulation E-mail agreement E-mail delivery Technology phase MRCE Face to Face Implementation phase Benefit increments not to scale

  16. What are the risks and issues • Changing the culture/behaviour of traditional business process and altering internal tasks/activities/workflow to implement revised endorsement practice to gain benefits (i) • No formal written guidance for Endorsements other than Contract Certainty code of Practice statement (i); - being mitigated by deployment of MRCE • Varying views from Brokers/Insurers on method of deploying electronic endorsements can act as barrier to take-up (r); - being mitigated by Implementation Pack guidance and directing the question to in-house/trade association’s legal and compliance representatives • Need to have MRCE in place before fully implementing phased roll-out (i); this delays phased roll-out but having MRCE in place will be a benefit; • No common infrastructure or (placing) systems platform that facilitates endorsement agreements (I); • Endorsement numbers are not currently officially monitored. For proper and accurate measurement of the penetration and success of the initiative, Market-wide endorsement statistics will be required and centrally monitored (i)

  17. What does success look like • Adoption and implementation of MRCE during end—2007, best practice from 1 March 2008 to facilitate Contract Certainty • Brokers agree to deliver Endorsements ‘electronically’ – e-mail is only the minimum requirement • Insurers agree to receive endorsements electronically and: • Agree electronically • Decline electronically • Request negotiation (have ‘urgent’ process in place) • By end 2008; say, 50% of endorsements sent electronically for agreement; most agreed and returned ‘electronically’ – do the non-complex ones……. • ACORD standards defined and Endorsements agreed using ACORD-compliant applications and software – is happening now and aim is to ramp-up during 2008. see e-mail as a Market “interim” stage Pilot participants Continue, Join new From Oct 2007

  18. Next Steps • Receive MRG feedback on recommendations tomorrow • Roll-out MRCE for consultation and agreement by 5 Oct 2007 and get market agreement by 1 Nov 07 • Issue Endorsements Via E-Message (EVE) Implementation pack during October 2007 to include: • Detailed process steps and guidance on implementation • How to join roll-out • Early use of one-to-one agreement process for endorsements with one agreement party • Measurement criteria for reporting • Further market briefings, presentations and support from MRPO, LMBC and project team from next week – want to hear from insurers writing Marine and Property business • Already in discussion with trade associations, class committees etc • Materials will be available on MRPO Website

  19. Summary Pilot completed, lessons learnt, revised recommendations MRCE being issued for consultation and agreement Recommendations to MRG for class-by-class roll-out: Marine and Property first and use one-to-one agreement process Key decision: • What will I accept as an endorsement agreement – broker • What ‘electronic’ process will I use to bind Endorsement agreements - Insurer Technology has a part to play now Questions/comments

  20. MRSG Endorsements – Phased Roll-Out S. Dean, 27th September 2007

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