Managing general agents operating in the London Market are under pressure to modernise their systems and processes and make them more transparent, as Bob Brown, chief executive of software company VIPR, tells Intelligent Insurer.
Embracing some of the bespoke software packages available is increasingly a must for managing general agents, according to Bob Brown, chief executive of software company VIPR, a provider of software solutions to this sector.
He believes that encroaching regulatory regimes—a mixture of Solvency II and the UK regulators—are increasingly making it virtually impossible for managing general agents (MGAs) to operate using the older and more pedestrian processes, some of which were long a tradition in the market. Add the commercial realities facing underwriters into this mix and change is inevitable.
“The use of software platforms by MGAs is increasingly a requirement across the board: Lloyd’s is requiring it as are the regulatory authorities,” says Brown. “They want to see evidence of transparency and good underwriting controls and require MGAs also to have very good reporting capabilities.
“The fact is that for many reasons the market cannot operate as it used to. This also allows MGAs to better manage larger volumes of business and keep a tight handle on profitability.”
VIPR offers a number of dedicated software solutions designed specifically for delegated authority business.
Two of its main products are Intrali, a software solution for bordereaux processing and management which standardises, checks and validates large amounts of bordereaux data; and Active Underwriter, an online quote and bind solution that accommodates the end-to-end transaction of insurance business, in real time, across Lloyd’s and international insurance markets.
Active Underwriter allows business to be instantaneously quoted online with pre-agreed parameters set by the capacity provider boosting efficiency while removing many of the risks associated with delegated business.
A journey to modernisation
Brown worked at Lloyd’s broker Marsh for 15 years before launching one of the UK’s first price comparison site for personal finance products and services. After building and selling that business he, along with his brother Richard, turned his attention back to the London Market insurance sector.
Brown says he expected things to have modernised in the period during which he had left the industry. He quickly discovered they had not and, in 2009, leveraging the expertise they had developed in the price comparison sector managing and processing large amounts of complex data, the brothers formed VIPR.
“I was out of the insurance market for 10 years and I thought everything would have modernised in the time I was away. I was surprised to find that it had not and in many ways it was still operating as it always had. I saw an opportunity.”
They specifically targeted the Lloyd’s and London company market where delegated underwriting authority takes place. He says he foresaw the fact that this sector would become more heavily regulated in the future and be forced to modernise in order to achieve the transparency and more detailed reporting requirements that would be needed.
The brothers initially looked at bordereaux processing and management, which was a very time-consuming process in the market and very difficult to control. It was a volume-based business which was moving large amounts of data around, sometimes in a physical format. Data existed in many different forms and often needed to be retyped and input manually, which was time-consuming, inefficient and prone to mistakes.
“The fact is, there was no way that underwriters could accurately check the data or produce meaningful reports,” Brown says.
“The amount of data being processed in this format was huge yet people were trying to check it manually. The big managing agents would receive hundreds of these bordereaux every month. We designed an automated system that converts everything to standard headings, checks all data against the original binder terms and also generates the reports needed automatically. This way, for example, a 40,000 line bordereaux can be checked in a few minutes.”
The Active Underwriter quote and bind facility fulfils a different function. Perfect for big volume, small premium business, it allows clients to speed up the process by which requests for quotes are received and information passed back and forth between the underwriter, MGA and eventual customer.
The online system allows underwriters to set criteria within which quotes can be generated automatically without the need for the direct involvement of an underwriter.
“We designed an automated system that converts everything to standard headings, checks all data against the original binder terms and also generates the reports needed automatically.”
“Under the old systems, a request might be sent to London, the underwriter will look at it, an email will go back and several days might pass before the business is confirmed and transacted. The process would also involve reams of paperwork and retyping of policy documents, and when you add up the man hours involved many types of business of this nature were fundamentally unprofitable,” says Brown.
“Using Active Underwriter, an automated facility can be set up that can quote business online automatically as long as it is within certain parameters. The risk can then be bound at the click of a mouse and renewals automated.
“What’s more, it will also automatically generate all the paperwork including policy documents and reporting requirements. It allows MGAs to write a lot more business but also tightly control the parameters of the underwriting.”
He notes that each system is built on a bespoke basis for clients. It can include features whereby underwriters are automatically notified if a risk is unusual in any way, allowing the factor of human judgement to still play an important role in the management of risk and development of a book of business.
It also easily allows clients to update and modify a policy mid-term if basic changes are made, such as additional items added or removed. He uses the example of livestock coverage where regular changes might be made around the animals covered, or fleet motor insurance where vehicles can be easily added or removed. Additional or return premiums can also be automatically calculated.
“In contrast, if this is done manually, it becomes hugely time-consuming and it is not cost-effective,” he says.
Brown says that every client wants something different. Most have initially explored the option of a cheaper ‘out of the box’ system but quickly realise a bigger investment is worth it when they consider all the advantages that VIPR software platforms offer.
“There is a lot of variability in quality out there that clients don’t generally take into account when we first speak to them. We spend a good amount of time discussing exactly what they want and, generally speaking, that is usually everything we offer.
“The efficiencies we offer are becoming more relevant to MGAs every year and it is especially true for firms dealing with large volumes of smaller premium business. They need more accurate controls and reporting and they need to do more business to make it profitable. The business can be monitored closely with reports on hit rates, what business is won or lost and who are the best agents, etc. They need these automated facilities in place.”
Brown says that the implementation of the system takes around three months but it is no more difficult for an established MGA to implement than it is for a start-up. That said, it can be especially useful for start-ups that need to achieve a certain revenue stream to get to profitability.
He gives the example of a start-up that targets coverage for show ponies and horses. “The premiums were fairly small so they needed to write thousands of these policies to build a book worth writing. We were able to automate the whole process meaning they could quickly build a substantial book worth millions.”
He believes the time is rapidly approaching when firms will simply not be allowed to underwrite some of this business using the historic manual systems, prone to error as they are.
“Our systems solve a lot of that and also ensure that underwriting decisions are confined within certain rules. As such, demand for our products is increasing. The market is changing and what we offer is ahead of the curve.
“We also have an exciting pipeline of other products which will enable our clients to become more efficient and more profitable still.”
Bob Brown is the chief executive of VIPR. He can be contacted at: email@example.com
VIPR, Bob Brown, MGAs, Insurance, London, UK