Improving credit control is vital as the market tries to manage costs and deliver profitability
The market faces significant challenges in the current pricing environment, whilst at the same time needing to effectively utilise capital to build a business that can grow into the opportunities that new, often international markets, represent. The market must make as much finance available as possible to its businesses if it is to boost results and drive the needed market innovation.
Against this background, credit control and the management of collecting premiums, the most vital revenue stream for insurers, continue to challenge London market insurers in both the home and international market.
Risk carriers require prompt payment but this is hindered due to underwriting financial data often not matching broker financial entries. While this may be the headline grabbing problem, below the surface an even longer list of problems lurks in the detail of the credit control and risk registration systems.
While the mis-matching of cash, unallocated cash and late payments to name a few prevail in all industries, the London market has specialised in developing its own entrenched cash management inefficiencies that hold the market back.
Some of the main factors driving poor credit control processes and the non-matching of financial data in the London market include:
- Complex and detailed calculations leading to misinterpretation at the point of entry on underwriting systems – providing a definitive final net position that would alleviate ambiguity
- Risk carriers not receiving or capturing all relevant financial data as quickly as they would like. The subscription market’s norms of operating with endorsements and other data often only going to the lead underwriter, creates specific problems of delay and misinterpretation
- Risk carriers having to allocate a substantial amount of expensive man hours to the reconciliation of premium data with brokers’ financial data. The same is true of brokers and there is only a finite amount of time that makes it commercially viable for a broker to look into cash issues and technical queries, such as older aged items.
It is often stated that problems will be solved with the arrival of straight through processing but the market needs to deal with the situation here and now.
If hoping for a utopian market solution of this magnitude might be too big a step, perhaps a more simple approach to the broker slip might be a way forward that delivers results without challenging the market’s standard practices.
Some key benefits of tackling the broker slip in the first instance could include:
- Eliminating ambiguities between gross to net premium calculations on all slips
- Striving for 100% take up on de-link signings ( i.e. technical signing will provide advance notice of the actual premium that is about to be settled
- Rolling out of e-accounting for non-bureau business market wide
These first steps would give the market confidence that small changes can bring rewards and encourage them to focus on the change that is needed to develop a wider solution to one of the market’s biggest problems.