RiskWrite 4.0: an insurance product builder’s perspective

RiskWrite’s product build capabilities have been considerably extended in version 4.0, allowing more complex insurance products to be developed, and with more features to help support the quotation process.  This significantly extends the scope of products our carriers and MGAs can build and assists their brokers with distribution via a greatly enhanced user experience.  The following are just 3 examples of the many new features I can use:

  • Tables allow repeating data sets to be captured for a product, for example, multi-vehicle or other multi-asset based products.  Tables can be configured to display in a number of different ways, and tables can contain other tables to ‘n’ levels, e.g. a Vehicles table can contain a table for vehicle modifications.
  • Action buttons and hyperlinks can be embedded in a product’s question set, e.g. to perform an address lookup or display a Key Facts document as part of the quote process.
  • Dynamic fields allow real-time calculation on-screen as part of the quote process.  This can be used for indicative premium calculation based on answers given by an underwriter or broker user.

5 reasons MGAs choose the wrong IT suppliers

In their vendor selection and management presentation, one of Gartner’s Research Directors, Dayla Sullivan, recognises that we now live in a world where we are ‘super-fast consumers’. She goes as far as to say that speed can trump SLAs, pricing, ROI measures and even the importance of strategic partnerships when choosing an IT provider.

For the growing insurance MGA market, selecting the right IT system can be time consuming. Especially when led by business or underwriter-side decision makers who may not have first-hand experience of a full, comprehensive RFP process.

The basics are obvious, what they all do, prioritising what you need (chances are you can’t have it all on the specific budget, timeframe and capabilities available) and making the best decision based on the future plans for your business.

So aside from following a checklist, like the resources detailed below, what else could you look out for?

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Useful supplier selection resources:

Nine steps to successful information technology vendor selection, TechWRITE, Inc. blog

The Successful Vendor Selection Process:  Five Steps, About.com – Operations / Technology. Authored by James Bucki, Director of Computing Technology, Genesee Community College

Gartner Vendor Selection – Latest Vendor Selection Trends‎ – Sourcing & strategic vendor relationships,  presented by Gayla Sullivan, Research Director, Gartner’s IT Asset Management, Vendor Management and Procurement team

Gartner report for members or purchase: Agenda Overview for IT Services Sourcing, 2014

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After discussing some of the main challenges of insurance technology selection with industry contacts, it appears there are some reasons people may choose the wrong supplier. They won’t affect all, but these have been highlighted as some of the uniquely insurance-related IT selection pitfalls:

  1. Short sightedness

Judgements based on only what a system can do now. Once it’s implemented what then? Can you control your operations and how quickly products get to market? Was the supplier product roadmap factored into selection? Was your business strategy for the next 5-10 years one of the key decision making factors? It may appear the ‘best’ decision at the time but if you are forking out additional funds next year to support a new distribution channel or scheme, what’s that term? Own goal.

  1. Blagging it

Are the people doing the selection process qualified enough? Do the selection panel know IT, your business and insurance well as a whole? Sometimes, especially in MGAs, only one or two people are truly leading the selection process and therefore may only have one or two areas of expertise – perhaps not enough to consider all of the selection implications.

  1. Image is everything

As a supplier we update our UIs, but in a technology forward world we are used to consuming good looking technology.

It’s very easy to show a simple, clean user interface quickly on a smaller device. Does ‘it looked just like a website’ during that demo take into account all of the functionality?

What lies beneath the technology? Is it built for the web instead of web enabled as an afterthought? Is the user interface stuck on top of lots of mashed together systems, (think putting lipstick on a pig), and what could that mean for future development, releases and support?

Don’t let how it looks in a flash on an iPad take priority over business benefits.

It sounds absurd but often people appear to put ‘brand’ and ‘image’ before features and functionality.  This is common of business-side decision makers who, rightly so, may be thinking of their staff, broker or end user customers at the time.

But once in the process should it not be centred on the top level basics?

Like:

o   What do the supplier’s clients say about the operational benefits?

o   Where are the suppliers investing their money, product R & D and functionality? Etc…

  1. Keeping up with the Joneses

Ahh the bandwagon, I jumped on several during my school years in the form of Doc Martins and a perm. There seems to be a wave of enthusiasm for certain systems at certain times, often following a big marketing push or people copying one another – thanks to the close proximity of the London Market in particular.

Some people feel that if your competitor has a system, you should select the same system. The word being ‘select’ not copy. You don’t copy their business strategy entirely, perhaps you want to differentiate yourself and could benefit even more so from different tools to achieve that.

Competitors may not even have made the best selection (the negatives likely not to be promoted).  Can your independent solution choice then make that difference to your operating ratio and profit next year, meaning you move up the Top 50 table ahead of them?

  1. The ‘experienced’ influencer

Somewhere along the way you may have recruited one:  A political, self-serving person masquerading as experienced.  Thought processes may include:

‘I know how to use this system, I’ve implemented it before, and I’ll push for it because it’ll be easiest’

‘If I don’t rock the boat and keep my head down I can leave in five years without having to change any systems’

‘My mate owns that company; I’ll give him my lead so we can go for beers together every week’

Some of these thought processes make sense – if you’ve implemented it before you are aware of the challenges. If you like someone within the supplier company, chances are you trust them and they’ll try and ensure a good job is done for you.

However, if persuasive, these types may lead you to a supplier decision, not based on company centric, future profit based reasoning.

Your experiences

What are your experiences of supplier selection challenges within the insurance MGA market?

And what have suppliers done, or not done, to help or hinder the process?

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Want to find out about eInsurance system RiskWrite to see if it qualifies for your RFP process?

Then book a meeting or ask a question today 01923 312366 / marketing@sabrefish.com

Sabrefish’s RiskWrite solution is a line of business neutral, full life-cycle underwriting system with accounts, claims and an intuitive, multi-section product builder. An integrated broker portal and optional web front ends mean you can distribute your products in the way you choose, from one point of origin. Clients benefit from quote & bind, workflow referrals, auto-documents, bordereau management, auto-rating, multiple languages, currencies and taxes, product build and subscription business features; so they can process more business with less resource for a scalable future.

Infographic; 12 RiskWrite facts you may not know

What really goes on behind the scenes in insurance technology

What really goes on behind the scenes in insurance technology

Sabrefish’s RiskWrite solution is a line of business neutral, full life-cycle underwriting system with accounts, claims and an intuitive, multi-section product builder. RiskWrite enables you to distribute your products, how you choose, from one point of origin due to an integrated broker portal and optional B2C and B2B web front ends.

Clients include; DUAL Group, Novae Group, Nexus Underwriting Management and W.R.Berkley Europe.

Enquiries: marketing@sabrefish.com, 01923 31236601923 312366

Sabrefish sponsor the first London Market Group Forum of 2014

Sabrefish were proud to sponsor the first London Market Group Forum of the year, promoting our full life-cycle, multichannel underwriting system, RiskWrite.

The London Market Group (LMG), supported by the Lloyd’s Market Association (LMA), is a senior market wide body with the primary function to act as champion of the modernisation agenda in the London Market.  Monthly informative LMG Forums take place for insurers, brokers, suppliers and influencers in London’s Willis building, welcoming speakers from influential organisations, which this month included; Willis, Marsh and Catlin.

Christopher Croft, Head of LMG Secretariat, opened 2014’s first LMG Forum with his usual wit. And as this month’s sponsor, I was on the receiving end (but wouldn’t expect any less!).

Click here to download the LMG Forum presentation slides.

The forum began with the usual round up of eAccounting and Non Bureau Accounting volumes and accuracy.

eAccounts accuracy is still 15% more accurate first time in comparison to IMR A&S submissions. This is true of both the Lloyd’s and companies market, as it was throughout 2013.

Non Bureau Accounting numbers are increasing year-on-year; it’s conceivable we may see a 100% adoption increase in 2014, judging by last year’s 80% increase.

Year

Average

Year-on-year % increase

2011 – 12

400

2012 – 13

1600

25%

2013 – 14 so far

2000

80%

The Board of Placing Platform Ltd (PPL) has defined their ‘workstreams’ for progress which include ‘Planning, review and governance’ through to ‘Market commitment and roll out’. Placing resources can be found here on the LMG website.

And the LMA, International Underwriting Association (IUA) and London & International Insurance Brokers’ Association (Liiba) continue to work together as the ‘Central Services Refresh Programme’, to make Central Services easier and more attractive to use by moving London market specific administration tasks, or “Londonisms”, away from the broker. Their agenda is as follows:

  • Defining a number of potential deliverables for 2014
  • Working with LIIBA to validate the operation of EBOT and ECOT in a subscription market
  • Developing metrics with carriers for how Market Submission can improve service performance

As the sponsor it was a pleasure providing the prizes for this month’s winners, congratulations to:

Richard Hayes, Head of ITAscot Underwriting

Charles Brown, PMOJLT

Event speakers & topics for the session included:

Shirine Khoury-Haq of Catlin; who chairs the TMEL Board and also represents the International Underwriting Association (IUA). Shirine presented on:

 “Delivering the foundation of the future: The Message Exchange Limited in 2014 and beyond”

Simon Harker, Global Chairman and CEO, Aviation and Aerospace Practice of Marsh Ltd presented on:

“Electronic Support for Endorsements – Aviation Initiative” – Sharing the work to increase usage for Aviation endorsements.

And…

Richard Brame, Director of Accounting and Settlement at Willis presented on:

“E-Accounting Expansion 2014 and Beyond” – Including a look at non bureau accounting from the broker perspective and how they will build on the 23 new business partnerships that went live in 2013.

The LMG is set to take on an even more influential role in London’s place on the global stage. Sabrefish look forward to observing and being a part of its progress.  

To view the full presentation, click here.

5 barriers to effective underwriter/broker collaboration

Balancing different commercial agendas between intermediaries and carriers will always make working together to achieve win-win terms a challenge.  Understanding and allowing your counterpart’s business objectives and limitations to influence your negotiations can, in turn, be used to drive your own objectives. What else enables an easy profitable and efficient working relationship? Here are a few things that have been brought to my attention…

1.            Info exchange

Broker submissions

Supporting information of the appropriate detail, length or format is still top of underwriters’ agendas. The London Market Group is enabling this process to be more uniform as part of the Market Reform Contract (MRC) to support broker and underwriter information sharing. Here’s what they say about the standard form of submissions, in their own words:

‘It offers a clear structure and means that brokers present contracts in a consistent manner. This in turn adds clarity to the broker/underwriter discussion and thus enhances the efficiency of the placing process… ensuring the content was aligned with the needs of contract certainty.’

Too little or messy information makes a valid underwriting judgement harder to achieve as well as increasing the risk of non-disclosure of material fact. On top of that reducing requests for further information, drawing out the process, benefits both parties.

Carrier service improved

Regular face-to-face meetings or phone calls, I’m told, are still the best way of maintaining good service levels and ensuring your incoming broker proposals are actually the business you write. That and up to date appetite lists are expected but not always delivered. The real benefit in maintaining these standards is the time freed up for carrier admin teams – when they are not wading through and logging unnecessary emails and proposals they can provide more support elsewhere.

2.            ACORD know how

At the April ACORD club, presentations were made by messaging champions from ACE, ACORD, Lloyd’s and Morning Data. They outlined the need for the market to improve the electronic exchange of structured data between brokers and underwriters. The best way for the market to do this? Full engagement from underwriters AND brokers with ACORD standard messaging.

Lloyd’s commissioned a proof of concept for messaging with the LMA (London Market Association) for their MRC (Market Reform Contract). Despite Lloyd’s working with a software provider and a number of brokers to develop a prototype, (North American Property MRC, Marine MRC and a MRCE), and it being established it could be successfully used in practice –  the London Market Modernisation Activity report  states there needs to be a market ‘pull’ and greater broker appetite for further investment.

Benefits of ACORD standard messaging:

  • Structured ACORD compliant data is automatically produced
  • The broker’s output is a PDF or Word version and an XML file containing the data
  • Human error is eliminated as broker and underwriter systems communicate directly
  • Time is saved on both sides by preventing the need for re-keying
  • If the broker changes any of the details, the underlying data will be updated and reflected in a new version

3. Market initiatives?

The commercially dynamic nature of the market brings huge advantages from free competition, diversity and innovation but is a major disadvantage when trying to address areas of common carrier and broker interest i.e. efficient collaboration.

Higher transactional costs come from DIY local methods of working which are continually resorted to after the failure of what is supposed to be ‘The Next Big Thing’. For example the “Darwin’s” “EPS’s” and “Blue Mountain’s” that inevitably make businesses sceptical about what truly is innovation and what is an expensive idea lacking in long term benefit or buy-in.

4. Solution to ‘sticking plaster’ systems

Poor systems selection based on historic requirements rather than future needs and poor systems integration with legacy systems are top pitfalls to avoid for future broker/ underwriter communication quality. Being blindsided by one new feature when the system doesn’t have the ability to support new distribution channels traps companies in the past –making it difficult to switch capital to new products, lines or geographies to ‘balance the books’ and create profit.

Attempts to expand into new classes or creating new or different products often result in ‘sticking plaster’ systems.

If you look at the retail industry, for example, those who remain profitable are forward looking with highly integrated systems strategies with flexible distribution channels to market. Those who have failed to bring together all of the operational and technology threads and ignore future channels are ending up with the liquidator.

Replicating a retail model for insurance would mean a fully integrated system that handles delegated authority, subscription and remote web-based products through an integrated broker portal.

This would make document, communications and policy details accessible for carriers and brokers to refer to, preventing unnecessary disputes and slowing of work. Reduced data transit time means more time to underwrite and broke deals.  The other benefit is all downstream activities premiums, claims and accounts are joined up in straight through processing.

RiskWrite features

RiskWrite case studies

5.            Doorstep advantage

From what I’ve experienced the ease of socialising with people in the London Market is taken as a given. Whether you started out with a stamp on the trading floor or have grown used to the culture sliding over from another industry, the proximity, as we all know, is a unique competitive feature.

London Market locality, however, increases the competition on your doorstep as well as your opportunity to take advantage of it. Are you making the most of networking with NEW people? Introducing yourself to people outside of your existing outlook contacts? I’m pretty new to insurance, so I want to translate face-to-face opportunities into potential long term commercial relationships/friendships.

My new goal? To follow up introductions more effectively off and online. For example, that interesting conversation I had with X at BIBA results in them as a new LinkedIn connection, someone I listen to on Twitter, invite to events and maybe, just maybe, them remembering Sabrefish when they need a new eInsurance system…

To arrange a demonstration or find out more, call 01923 312 366 or email info@sabrefish.com

Top 10 Lloyd’s, Coverholder & London Market quotes of the last year

Novae recently published their ‘Looking forward’ industry survey where they interviewed senior level influencers in the insurance industry to gauge their present and prospective analysis. It got me thinking, as I remember listening to Lloyd’s CEO Richard Ward present at the Xchanging London Market conference last year. Richard highlighted findings from that year’s annual PWC CEO Survey of insurance CEO’s finding that:

‘Nearly half of Insurance CEOs believe that the economy will continue to get worse over the next 12 months.’ Yet the report also found ‘90% are confident about improving their company’s revenues over the next 12 months’ (2012)

Compare that to this year and optimism still stands (despite austerity’s stronghold):

2013 saw ‘39% of Insurance CEOs are very confident about their ability to increase revenue over the next 12 months, and a further 49% are somewhat confident.’

Are you as confident in your organisation’s success? What has the industry been saying over the past year about the market and what will shape profit now and in the future? And most importantly, what are your competitors hearing and acting upon?

_______________________________________________________________________________________________________

Quotes

“Lloyd’s should continue to innovate and focus on product development and new lines and innovate and keep it close to business. And they should seek to resist the homogenisation of all syndicates.”
Novae ‘Looking Forward’ industry survey – February 2013

“The benefits of moving from a paper dominated community into the electronic age are manifold; speed, transparency, the development within each insurer and broker of KPI’s, the opportunity to better articulate and differentiate the value of performance, communication. The London subscription market will always have as its corner stone face-to-face negotiation – but as a practical matter technology provides a magnificent medium for better, quicker more auditable communication”
Barnabas Hurst Bannister, Chair of the London Market Group, Xchanging London Market Conference – September 2012

“It’s an interesting change from a few years ago, when it’s fair to say people were turning their noses up at delegating authority, giving the pen away. Now there is an acceptance that it’s the way to get good quality, high-volume, low-value business.”
Peter Montanaro, Head of Delegated Authorities, Lloyd’s, MGAA – April 2012

‘’It is imperative you get multi channel distribution correct, understand the relative importance of each channel and be intuitive to the future purchasing decisions of your customers – as well as investing time and energy in a unique proposition that adds genuine value and therefore provides longevity through, beyond the market cycle…’’
Dan Martin, Head of UK Regional Development, Catlin Underwriting Agencies, Sabrefish MGA event (formerly Salmon) – September 2012

“Technology is becoming part of the decision making process when people select a broker, MGA or underwriter as a partner”
Peter Montanaro, Head of Delegated Authorities, Lloyd’s, Sabrefish Insurance event (formally Salmon) – May 2012

“The UK is the leading exporter of financial services across the globe. The UK insurance industry is the largest in Europe and third largest in the world. The London insurance market is the most sophisticated insurance market on the planet”
Steve Hearn, Chairman & CEO, Willis Global, Xchanging London Market Conference – September 2012  

“The infrastructure is here in London, the talent is here, the subscription market is here, and brokers like it. Lloyd’s is more secure than it has ever been. Investors understand Lloyd’s now.”
Novae ‘Looking Forward’ industry survey – February 2013

 “Nexus Group (are) on course to become the largest independent managing general agency (MGA) in the London Market.”
Intelligent Insurer – March 2013

 “The underwriter who delegates ill-advisedly to a bad MGA has nobody to blame but himself. They should look at themselves because they gave their pen away. Somebody or something persuaded them to enter into that arrangement. I never blamed a broker for broking bad business to me. I only ever blamed myself for writing it.”
Reg Brown, Chairman, MGAA, Insurance Day – July 2012

 “If you have an MGA, as a broker or underwriter, you hold much more information about the nook that you write and it means you can work closer with insurers to ensure their profitability and enhanced cover for your clients. It is a relationship that a business of our size needs with insurers. Gone are the days where you just go in there and negotiate on commission.”
Robert Organ, Chief Financial Officer, Bluefin, Insurance Times – March 2013

Did you miss the Sabrefish launch party?

Last Thursday 28th February saw the good, the bad (Michael Jackson version, meaning good) and the attractive (!) gather to raise a glass to celebrate the launch of Sabrefish; following its acquisition out of Salmon – including the entire eInsurance business, RiskWrite software and staff.

Attendees from the likes of Aviva, Canopius, Drivenlower, Harel, Insurance Insider, LIIBA, Tysers, Towers Watson, T H March and Sabrefish clients and friends from DUAL Corporate Risks, Novae, Nexus Underwriting Management, W R Berkley and more came to Minster Exchange for the occasion!

Simon Ball, two-time RiskWrite customer and Director of Quotall said on the night;

‘I bought RiskWrite not once, but twice! Because why change a winning game. If there is a better solution out there – I’ve not seen it.’

The Sabrefish gang

The Sabrefish gang

Revellers

Revellers

The refreshments and nibbles were plentiful and a good time was had by all. Sorry to those who were unable to join us – we look forward to inviting you next time!

About Sabrefish

Design & build for your business     RiskWrite     Multi channel insurance     Clients      Case studies

Want to ask us a question?

Contact us on +44 (0)1923 312 366 or marketing@sabrefish.com.

Bed time

Bed time

 

Bon voyage! Salmon and Sabrefish swim to separate seas

Sabrefish, eInsurance specialists, announced today that it has acquired Salmon’s insurance business, including RiskWrite software and staff. The eInsurance team originated as part of Salmon in 1989. Salmon has developed commerce oriented projects for leading names in retail, insurance and retail finance over the last 23 years.

As of January 2013 the eInsurance side of the business, RiskWrite software,  it’s staff and some new additions separated from Salmon and is now a fully independant global insurance technology provider named Sabrefish.

Commenting on the news, Chris Harvey, CEO of Sabrefish said, “The acquisition of Salmon’s insurance business marks an exciting new chapter in the development of RiskWrite. This follows on from last year’s announcements of major new features in RiskWrite Enterprise Version 3 and the launch of RiskWrite Managed Service aimed at intermediaries and smaller carriers.”

When the insurance team operated under the Salmon brand they worked separately but alongside the retail team – sharing the same on budget, on time, customer oriented values which will continue to be upheld by both Sabrefish and Salmon. Salmon will retain it’s retail and manufacturing clients and Sabrefish its insurance clients and expertise.

With fond memories and excitement for the future, Sabrefish wish Salmon every success!

What are the key differentiators for a successful MGA and what are the opportunities and threats going into 2013?

On 26th September 2012 senior executives from the likes of Aon, Allied World Insurance, Axis, Chartis, Dual International, Hiscox, Marsh, the MGAA, Novae, Torus, Sagicor and WR Berkley Syndicate attended an Executive Briefing entitled ”What are the key differentiators for a successful MGA and what are the opportunities and threats going into 2013?’.

The event coincided with the launch of RiskWrite Managed Service, the addition to RiskWrite Enterprise, Sabrefish’s multi channel eInsurance software.

Feedback from attendees was very positive so I thought I’d summarise the presentations. If you would like to put forward any areas of interest for future briefings and content, make a recommendation,  or read more about RiskWrite see Sabrefish’s multi channel insurance software here.

Dan Martin, Head of UK Regional Development at Catlin Underwriting Agencies Ltd

Neil Hodges, Salmon’s Insurance Client Executive introduced the first speaker, Dan Martin, Head of UK Regional Development at Catlin Underwriting Agencies Ltd, as a ‘mere boy’ having only spent twenty years in the industry! Dan commenced his presentation on ‘Distribution is a key factor but an MGA needs to add value in order to break into new and existing markets – the underwriter’s viewpoint’. Dan addressed the current options for MGA’s to access the market looking at traditional channels such as retail, wholesale, strategic partnerships and modern channels such as online, mobile, price comparison websites. He questioned whether customers are tiring of social networking as a distribution channel and whether share prices are indicative of the value of Facebook. Dan cited the hefty financial investments required for price comparison websites and online as a medium – but their growing necessity alongside mobile apps – and recognised the most unproven traditional channel of sub-delegated, calling it a ‘leap of faith’.

Most notable of these insights was the separation between traditional and modern channels. For example the move to online, social and mobile and the news that Google is now partaking in the price comparison motor market.  The high cost and resource investment required in technology, time and the new generation of specialised talent were recognised as key profit generating factors. Dan said to not deviate from basing your multi channel distribution strategy on your customer’s behaviour.

“Are we planning an IT business, a marketing business or an insurance business?”

Dan said the opposite of a highly structured multi channel distribution strategy and the natural partner of many distribution channels is acquisition costs. Whenever removing acquisition costs from the chain, be careful you are not exposing greater structural costs such as IT, marketing and compliance. An underwriter’s role is to write profitable business – overall profitability relies upon a high level of stability.

As an underwriter Dan reminded the audience that MGAs are an underwriting proposition, the MGAs are acting as an agent to insurer and it is not just about filling a book of business as quickly as possible with exceptionally high conversion rates.

Dan concluded ‘’It is imperative you get multi channel distribution correct, understand the relative importance of each channel and be intuitive to the future purchasing decisions of your customers –  as well as investing time and energy in a unique proposition that adds genuine value and therefore provides longevity through beyond the market cycle…’’

Top 6 macro-economic considerations for gratifying and enacting MGA purchasing decisions – Less trust: in banks, FS and insurance – Increasing regulatory change: advice importance/ transparency – Innovations in IT – cloud and mobile technology – How do your channels inter-relate and which take priority – Rare to be price setter, often following the market – Slim margins outside of risk exposed premiums

Top questions to ask yourself when setting up an MGAs – Are you sticking with the business plan? – Do you have due diligence, do you know who you are getting involved with and in what way? – Is communication clear? Shout if there is a failure of disclosure from the underwriter or in the instance of unheard disclosure – Do you have the appropriate referral channels? – Access to decision makers? – Is bordereaux received and paid on time? – Is the market moving around you and are you responding?

 

John Holm, Commercial Director at Capita Insurance Services

Neil Hodges then introduced John Holm Commercial Director at Capita Insurance Services as having 30 years experience – but within banking, in particular analysing risk. John then took the floor to present on ‘Market opportunity is a starting point however finding the team, raising capital and seeking outsourcing partners all need to be addressed’.

John’s presentation promoted Capita’s investment in MGAs, he started by emphasising evidence of the quality and sustainability of the underwriting, involving a risk analysis of any MGA business plan and underwriting results from previous years. The most favoured types of MGAs for investment are niche businesses with a profitable track record. John referred to the value of ‘skin in the game’ i.e. financial investment from the MGA management/owners, in particular cash, those that are asset rich and cash poor would need some kind of guarantee. Capita, John highlighted, are investors that would only request a negotiable minority share.

Financing growth is usually via a loan or acquisition and Capita are an alternative. Also if a bank pays half, for example, and Capita is an option for assist with the other half.

John concluded that as with all good businesses the key differentiator from his experience is the people. The quality of the people who run the business as there will always be threats and opportunities and good people know how to deal with threats and take advantage of those opportunities.

 

Mike Walton, Case Study – setting up an MGA

Neil Hodges then introduced the final speaker Mike Walton referring to his senior roles at Nexus, Novae and PRI Group. Mike then commenced his presentation, ‘A Case study – a current MGA project – the key drivers and challenges’. Mike started stating he is currently evaluating a new start up opportunity. Mike shared his view that MGAs were easy to set up and became profitable as they are attractive to disenfranchised corporate underwriters. He mused about MGA’s increased popularity and the regulators attempts to create more resistant regulatory structures to better manage the market.

Simple components –  what is needed in order to set up an MGA; – Regulatory environment – insurance capacity – An underwriter – A distribution platform – Brokers to promote the product – Initial capital – TPA (Trading Partner Agreements)

Mike shared his key challenges and the many questions he asked himself. Questions such as; ‘I want to do it now and cheaply – do I outsource or keep in house?’, ‘How to put in little money for the greatest return?’, ‘Whether to use a carrier or sell direct?’, ‘Whether to set up one’s own carrier or sell into insurers and brokers that want it?. Mike acknowledged that the whole process will be based on value creation, but ultimately the bottom line – underwriting profit; a talented underwriter who gets the right price and creates profit.

Mike Walton’s regulatory requirement cost as a percentage of income

Regulatory CapitalMike shared his experience that regulatory capital is ‘not going to break the bank’ and gave this quick breakdown of regulatory requirement cost as a percentage of income.

Mike said regulators are not interested in regulatory capital but cash flow forecasts, as proof you can satisfy the business liabilities as and when they are due. Another challenge is that the overrider can’t really exceed costs, it needs to equate to costs. Also that owners shouldn’t make a profit on business written irrespective of profit commissions, otherwise the loss is felt by the underwriter and insurers are becoming ‘wise to this’. According to Mike, MGA owners should expect the business to break even for approximately two years.

 

 

Working capital costs six months prior to trading as an MGA

Working capital

 

Mike’s top 3 cash flow forecast insights

• Premium income never arrives as quickly as the plan indicates

• Deficit will exceed £500,000 before business revenue flows steady

• Reasonable to assume that working capital requirements will equate to 6 months of annualised cost base

Financing your MGA

BROKERS – Brokers within your specialism will  contribute funds – loans to fund the start up of the business – to secure you as capacity for their products.

SPECIALIST OUTSOURCERS – Outsourcers provide intelligent money, they see and know deals. They are good long term partners, if the deal is right they will also be focused on exit. Some will fund the working capital up front, so it can be a cheap opportunity to start making money but you don’t really want to give them more than 20% and they must deliver.

INSURERS – Insurers will give you an advanced overrider, however he emphasised the seriousness of this transaction saying that he knows of insurers that have lent money to MGAs and they have never underwritten a pound of business, it is not free money and can impact your career!

BANKS – Banks not looking to lend money now; whereas three or five years ago they would. Last year, for example, they would not invest in a binder business which had large books of guaranteed business and guaranteed commissions, they will no longer ‘touch’ future streams. If they do it is requires personal guarantees = unnecessary pressure?

INTER-MANAGEMENT LOANS – People lending one another money within the management team can result in uneven traction when it comes to business decision making. Means tested is one option. Those who don’t want to invest means tested are likely to have the most money!

Mike covered his experience of Lloyd’s vs. the FSA regulatory frameworks (see Regulatory Framework slide).  Mike shared his insights saying Lloyd’s comprehensive questioning around why you will win the business is reassuring, they are reputable and to be Lloyd’s approved you must detail a niche product, service proposition or strength of personal relationship that will move a portfolio from one insurer to another without reducing profit. Benefits such as security and licences prove attractive and they are dogmatic in expecting an IT strategy and platform and disaster recovery.

The FSA is an easier environment as they don’t have Lloyd’s additional responsibility to protect the franchise – they will just look at the business plan.

For the full event presentation, click here to download from Sabrefish’s resources

 

LMG Forum: 10 tips for E-endorsements and Lloyd’s touch tables – a solution to ‘ping-ponging’?

Salmon was pleased to sponsor the Endorsement Manager of the Month awards at the London Market Group Forum on 26th July at the Willis Building in London. Congratulations to the winners – Ropner Insurance Services and Chubb.

The awards were presented by Christopher Croft, LMG Secretariat who also gave an update on modernisation. Chris attributed the fall in E-endorsements in June to the Jubilee celebrations, noting that the July figures have already ‘oustripped June volumes’.

Next up was Hayley Spink, from the LMG  Endorsements Group who shared good practice tips from brokers, carriers and MGAs who have implemented E-endorsements, including:

  1. Having a strong visible senior sponsor.
  2. Having access to good quality management information.
  3. Setting targets,and including these in underwriters’ or brokers’ personal objectives.
  4. Communicating internally.
  5. Having champions within the underwriting or broking team.
  6. Seeking and sharing feedback.
  7. Sharing the Clause wording internally and with the client each time a  risk is being negotiated or renewed.
  8. Talking to peers at other companies and sharing good practice.
  9. ‘Hand holding’ when the company first goes online to ensure the first endorsements go smoothly.
  10. Setting up internal competition between teams.

Paul Willoughby, Project Manager in Market Development at Lloyd’s concluded the morning’s proceedings on the topic of future technology. He talked about various market development initiatives, including the collaboration project.

Paul provided some background to this by summarising the process for the lifecycle of a risk as Preparation, Negotiation and Processing. He commented that in the Lloyd’s market the traditional face-to-face negotiation model can be very efficient.  However, he then went on to describe intriguing-sounding practices like ‘ping-ponging’ that actually make the negotiation less efficient. Fortunately, he explained that ‘ping-ponging’ was the repeated sending of a contract back and forth between underwriter and broker for many small changes.

Lastly, he shared feedback from the recent interactive ‘touch table’ experiment in the Lloyd’s coffeeshop. Paul said he was shocked by the 90% positive feedback from market practitioners.  He saw this type of technology as supporting the traditional Lloyd’s face-to-face business model but improving speed by giving underwriters and brokers access to everything they needed in one place. There are more details here.

All in all, an enjoyable and informative start to a Thursday.  You can  register here for the next LMG Forum on 23rd August.

Download the slides here