Through the advent of Electronic Claims Files and other claims initiatives, such as the Claims Management Principles and Minimum Standards, the claims process in the London Market is undergoing a revolution, says Tim Willcock, underwriting and claims manager at Lloyd's Market Association (LMA).

The Electronic Claims Files (ECF) project should not be underestimated. This £3 million project is a fundamental part of the London Market Principles, (LMP) objective of achieving a streamlined claims agreement across the London Market and once fully operational in September 2006 will become the predominant means of handing claims in the Lloyd’s market.

Clients will benefit from a more efficient service and faster advising under the ECF procedure, which ultimately leads to earlier resolution of claims.

For insurers, electronic document management systems (repositories) will allow all underwriters to view the claims information at the same time. This will speed up the claimshandling process by eliminating the need for brokers to see each underwriter in turn, offering insurers more control over the workflow and management of claims files whilst supporting improvements to the market claims payments process.

The current claims process in the London Market is paper-based and labour intensive. Documents are shipped from brokers’ regional offices to London offices and then taken by hand around the London Market for review and agreement by underwriters. This process is only supported by technology in some areas.

This process is inefficient and time consuming, resulting in delays in service to clients, unnecessary cost to brokers and insurers and the lack of readily available claim information to all parties. The insurer, who has ultimate responsibility to the insured, has limited control over the process having no real ownership of the claim file and being reliant on the broker to provide information for review.

A London Market-wide approach was taken to address these issues in 2000 under the London Market Principles (LMP) work; a joint collaboration between the Lloyd’s and Companyciples insurance markets and the broking community. LMP sets out a vision of improving claims processes and reducing timescales through a revolutionary claims reform programme, recognising the need for an electronic infrastructure in order to improve, streamline and modernise the process.

Electronic Claims Files are a key enabler of the LMP claims reforms and are integrated with the other market reform work streams. Technology will allow all participants to intercommunicate and view files concurrently. The speeding up of the delivery of claim information, the elimination of serial presentations and the ability of different agreement parties to make decisions in parallel, will lead to a more transparent and quicker process. This will improve service to clients and mean that claim files will always be available to insurers for their own review, record keeping and as an aid to improving management of their outward reinsurance recoveries.

The Market had acknowledged the need for (and the availability of) repository technology to update and modernise the claims process. In March 2003, the Lloyd’s Market Association (LMA) gained the support of its members – the Lloyd’s Managing Agents – and mobilised the market to move forward together. The LMA facilitated negotiations between the market and service providers, with Xchanging ultimately being chosen as the preferred supplier for the provision of an insurers’ market repository and enhancements to CLASS (Claims Loss Advice and Settlement System) for Lloyd’s.

The LMA managed progress through the compilation and signing of the contract for provision of services and established agreement for the governance and payment mechanism.

Two LMA groups were established to manage specific aspects of the initiative. The Systems Delivery Group (SDG), comprising members of the initial negotiation team plus others, is responsible for managing the delivery of the IT infrastructure and ensuring that Xchanging meets its contractual commitments to timescale and budget. The Electronic Claims Practitioner Group (ECPG), made up of claims practitioners from Managing Agents and company market representatives, is helping Xchanging to design the system in order to meet the requirements of the market for the project.

Support to the two groups is currently being provided by the Market Reform Programme Office (MRPO), through the governance of the LMA and the Market Reform Group structure.

The infrastructure required to support the electronic handling of claims comprises three elements:

1. The market repository, which stores the documents required for handling claims electronically
2. Claims Loss Advice and Settlement System (CLASS) for the Lloyd’s market, which allows syndicates to manage claims and financial transactions in support of the claims agreement rules (currently the Lloyd’s Claims Scheme)
3. Document Repository Interoperability (DRI), which allows documents and data to be moved electronically between repositories to international ACORD standards.

Xchanging successfully delivered the infrastructure for Market Acceptance Testing on May 15th 2006. The delivery took place in four phases during 2005 and 2006 and is expected to be available for use by the whole market in September 2006.

The first two phases of the project made the repository easier to use and provided enhanced functionality. All claim documents are shown on a single view and other functions, including filter and search options, were introduced.

Phase 3 enabled claims files to be transferred electronically between repositories, subject to international ACORD (Association for Cooperative Operations Research and Development) standards. The final Phase provided a fully integrated, online system for claims processing at Lloyd’s, delivering enhancements including the display of CLASS data and repository documents through a new GUI (graphical user interface), plus additional components for an improved repository.

The LMA, through SDG and ECPG, has worked with Xchanging to initiate and progress the project, through mobilising the market and providing the central coordination to facilitate discussions between the market and the service provider. LMA has also helped to design the screens and provided the information to be available on the system. It has also worked with Xchanging and MRPO to produce a high-level guide on the technical implementation which supports the ECF project; a draft Systems Processes and Procedures manual, detailing the role of all parties in the process, is now available on the MRPO website at: www.marketreform.co.uk

In addition, LMA has assisted Xchanging and MRPO in the provision of workshops convened for the market to review the generic process and class of business variations.

Through the advent of ECF and other claims initiatives such as the Claims Management Principles and Minimum Standards, the claims process in the London Market is undergoing a revolution. The current claims and other market reform initiatives are encouraging the impetus for change and this change requires the whole market to embrace the new methods by updating mindsets and changing working practices.

The ECF initiative is a key part of the London process reform programme and is on the brink of successful roll out across the entire market. It will be the first electronic claims infrastructure to be introduced at Lloyd’s that combines documents required to adjust the claims with the financial information. This allows the whole decision making process to be handled and recorded electronically. Its adoption will demonstrate a great leap forward in terms of modernising the claims process and will cause a significant shift in how the London Market operates.

Practitioners in both the insurance and broking communities must adapt to new electronic working practices, since the aim is to move all information to become available on electronic repositories.

For claims practitioners, ECF will mean the process will be driven by electronic information appearing in their inbox. The process will no longer be prompted by brokers physically walking the file around the Market.

The Lloyd’s Managing Agents have funded and fully supported this initiative, through the LMA. Four brokers have publicly committed to supporting the initiative: Aon, Benfield, Marsh and Guy Carpenter with further brokers involved in the Market Acceptance Testing, including Millers and Willis. Company market insurers are also trialling an electronic claims files pilot and are expected to come fully on board with ECF when the technology becomes available for the whole market in September.

It is likely there will be a slow build up of electronic handling of claims across the Market, although some managing agents and brokers are committed to moving to the electronic process as soon as possible. With the ECF initiative driving benefits for clients, insurers and brokers throughout the London Market, it is imperative for the Market to ensure that it is ready and able to meet the electronic challenge.

This Special item appeared in issue 106 of JTW News - June 2006

Author: Tim Willcock - Lloyd's Market Association (LMA)