INSURANCE NOT ARCHAEOLOGY - Unlocking value for Agents through real-time back office automation - distriBind
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INSURANCE NOT ARCHAEOLOGY Unlocking value for Agents through real-time back office automation
“AUTOMATION
APPLIED TO AN
INEFFICIENT
OPERATION WILL
MAGNIFY THE
INEFFICIENCY.”
BILL GATES
ABOUT US
distriBind distriBind is a London-based InsurTech solving problems
caused by Bordereaux. These problems are widely rec-
ognised but existing solutions have fallen short of solving
them.
distriBind is an Automated Data Exchange and Back Office
that can help all participants across the value chain. Whether
you distribute using traditional “relationship-based” sales
methods or use digital distribution via App, Portal or Digitial
Quote & Bind, distriBind can help improve your process.
distriBind CEO Dave Connors has experienced bordereaux
Dave Connors problems first hand over 20+ years in the industry focused on
Delegated Authority and Reinsurance in the London, US and
International markets.
In 2018 Dave founded distriBind with the mission to finally
fix a problem everyone recognises but nobody has been able
to crack.
CONTENTS
i) About Us
ii) Contents
1 INTRODUCTION
Definitions
2 HOW ARE WE DOING?
A Snapshot of the Market
Misaligned Expectations
Poor Data and Manual Effort
The Impact of Covid
8 FIXING THE WRONG PROBLEM
Priorities and Diagnosis
The Limits of Data Standardisation
Automated Bordereaux Misses the Point
Your Carrier is not an Archaeologist
11 CONCLUSION
Bordereaux are holding you back
Taking a different approach
Use Data Models, not Bordereaux Maps
Data separation is Transformational
Management by Exception
INTRODUCTION This paper will investigate the exsiting state of “Agent-led” distribution, it’s challenges, and how the proper application of automation to back office can unlock value for distributors. Definitions Throughout this paper, we will use the ration” arrangement between a distributor catch-all terms “Agent” and “Delegated Au- and an Insurance Capacity provider regard- thority” for ease and consistency. less of the level of authority delegated. “Agent” is used to mean any Insurance “Carrier” is used to mean any regulated Agent, Authorised Representative, MGA, Insurance Risk Carrier providing Capacity to Coverholder or other distributor using their Agents. own underwriting and marketing knowledge on behalf of an Insurance Capacity provider. Agents may hold differing (or no) levels of authority. “Delegated Authority” is used to mean any Binding Authority, Lineslip, Program, Scheme, Consortia or other “Master / Decla-
HOW ARE WE DOING?
Misaligned Expectations
Delegated Authority represents a significant
section of the market, generally around 7 – Agents and Carriers have an important if
10% of more developed markets and higher strange relationship. Agents could not op-
in emerging markets. erate without Capacity provision, and they
provide important extensions to Carriers’
The UK MGAA estimates its members write underwriting expertise and marketing reach.
over 10% of the UK General Insurance mar-
ket1, and in the Lloyd’s Market Delegated
Authority contributes nearly 40% of annual
premium2.
In the US, an estimated $45bn of premium
10% 44.9
is written annually through Agents, although
inconsistencies in reporting mean this may Share of UK GI Premium US Agent/Program Annual
written by MGAA members Premium in $bn
be over $50bn.3
1 MGAA Website
2 According to LMA at launch of their Delegated DA Share of Lloyd’s Market Premium
Authority Committee
3 Conning, 2020: Managing General Agents -
Managing Through the Storm
DA Premium Other
Misaligned Expectations
The value of Agent-led distribution is clear in vide additional capacity in a sector that was
most analysis: showing above average premium growth and
profitability?
In the last major study covering the 10 years
up to 2015, MGAs maintained a combined
ratio nearly 7% lower than the broader P&C
market1 and their premium growth has tend-
ed to outstrip the general market - Conning
Maintain or reduce
estimated MGA growth of 32% in 2016 and capacity
that trend continued through 20192.
39%
Similarly, ACORDs 10-year analysis showed Reduce or hold steady
available capacity -
that 73% of their “Intelligent Growth” Carri- 56%
ers leveraged Agent distribution3.
Despite this demonstrable value, it was
noticeable that Clyde & Co’s 2019 MGA sur- Seek additional ca-
vey 4showed a clear mismatch in capacity pacity
plans for 2020: 61% of Agents expected to 61%
seek increased capacity while 56% of Carri-
ers expected their capacity provision to hold Increase available
steady or reduce. capacity -
44%
Why might there be a lack of appetite to pro-
1 Grant Thornton, 2015: Growth strategies
through MGAs: Opportunities and challenges
2 Conning, 2019: Managing General Agents -
The Super Model of the Insurance Industry Carriers Agents
3 ACORD, 2021: Digitization and Distribution
2021
4 Clyde & Co, 2019: Which way now? Is the UK
MGA Market at a crossroads?
INTELLIGENT GROWTH - ACORD STUDY
ACORD’s study “Intelligent Growth - Intent, Decisions, Outcomes” was used as the basis for
their “Digitization and Distribution” paper.
The study defines Intelligent Growth as surpassing the study average in both financial perfor-
mance and market share growth.“DATA PROVISION (OR
ITS AVAILABILITY) IS
OFTEN SUBSTANDARD/
POOR. THIS MAKES
THE WHOLE
ANALYSIS PROCESS
OVERLY LABOUR
INTENSIVE.”
EY/INSIDER SURVEY
RESPONDENTPoor data and manual effort
The EY / Insurance Insider Market Senti- analysis process overly labour intensive.”
ment1 report from 2019 makes sober reading. (EY/INSIDER SURVEY RESPONDENT)
With a 58/42 London Market / Non-London
response split, and with half of the Lloyd’s “[Carriers] need to allocate their internal
Market DA Premium coming from North expense to [Agents] more accurately to re-
America, it gives a good insight to issues ev- flect the actual time and resource required
erywhere. to support an [Agent].” (EY/INSIDER SURVEY
RESPONDENT)
Whereas the vast majority of respondents
saw Acceptable or better Combined Ratio re- “No growth. I see a decreasing number of
sults from Delegated Authority business, 40% [Agent]s securing partners long term.” (EY/
also thought performance measurement of INSIDER SURVEY RESPONDENT)
DA business was ineffective. 47% of respon-
dents thought Agent remuneration was too
high given the oversight burden. These responses, contemporary to the Clyde
& Co report, perhaps shed light on why a
sector with ostensibly favourable results also
The EY/Insider survey is particularly insight- faces significant challenges.
ful because it contains comments from the
respondents, and this clearly has a theme:
The response from Agents should be clear
- give better, faster data. Reduce the cost of
“Data provision (or its availability) is often understanding what business you’ve writ-
substandard/poor. This makes the whole ten, and the cost of process it. This is how to
1 EY/Insurance Insider Market Sentiment Re-
port, Delegated Authority
attract and maintain capacity.% of MGAs expecting Covid % of MGAs expecting Covid % of Carrierss expecting % of Carrierss expecting
to reduce available capacity to increase available Covid to reduce available Covid toincrease available
capacity capacity capacity
50% 47%
12% 28%
Carriers are more optimistic than Agents about the impact of Covid on Capacity, but still more expect
capacity to reduce than increase. Agents need to position themselves to be more attractive.
The Impact of Covid
While this paper is not about the effects of too true for many familiar with the state of
the Covid-19 pandemic, it is obviously an Delegated Authority. Doing this on two large
event of major significance that requires screens in an office was merely ordinarily
addressing. inefficient – doing it from home on a laptop is
another order of magnitude.
Like many aspects of the pandemic, there is
unlikely to be a blanket impact with a uni- The Clyde survey shows 41% of Carriers only
form effect across the sector; rather more providing capacity to MGAs with strong tech-
likely is that there will be winners and losers. nology, demonstrating the importance of the
This is borne out by Clyde & Co’s October MGAs technology and processes.
2020 follow-up survey: 47% of Carriers and
50% of MGAs think the pandemic will make Covid will also have an impact on Insurance
less capacity available, yet 28% of Carriers needs – accelerating the increase in Usage
and 12% of MGAs thought available capacity Based Insurance and short term insurances
would increase. (Clyde & Co, 2020: proceed- as work-life habits change particularly in mo-
ing with caution) tor, travel, and professional insurances.
What’s clear is that the pandemic and the Agents who can demonstrate value and
switch to home working has strengthened efficiency through automation will maintain
the need for good technology and operation- strong relationships and be well-placed to
al efficiency. The image of a back-office tech- reap benefits.
nician with two screens on the go, a spread-
sheet on each comparing rows and columns
in a manual reconciliation exercise will ring“[CARRIERS] NEED TO
ALLOCATE THEIR IN-
TERNAL EXPENSE TO
[AGENTS] MORE ACCU-
RATELY TO REFLECT THE
ACTUAL TIME AND RE-
SOURCE REQUIRED TO
SUPPORT AN [AGENT]”
EY/INSIDER SURVEY
RESPONDENTFIXING THE WRONG
PROBLEM
Priorities and Diagnosis
The common focus of MGA technology is in business as 40% of Premium Income in the
underwriting and in particular the capture Lloyd’s Market and 30% in other markets1.
and analysis either of new data or extracting Transformative back-office efficiency is the
information from existing data (e.g. mort- key to getting these numbers down.
gage applications) to avoid lengthy question-
naires. Bordereaux are regularly held-up by anyone
familiar with Delegated Authority as a cost-
It is clear why the focus is on this area – sink, a process that is time consuming, costly
making better underwriting decisions and and overwhelmingly manual.
improving customer journeys are of obvious
importance. At the same time, the technolo- Hitherto, approaches taken to bordereaux
gy to capture and integrate such data – from have been piecemeal and tackling the wrong
wearables, telematics devices and more – problem and in discussing two of the main
has become ever cheaper. approaches it is clear why.
However, there is no question that Insurance
is a costly business to administer – when
launching the “Future of Lloyd’s Prospectus”
Lloyd’s CEO John Neal cited the cost of doing 1 John Neal, Future of Lloyd’s Prospectus
Launch, 2019
40% 30%
Cost of doing business as percentage of Premium Income at Lloyd’s (left) & other markets (right)The Limits of Data Standardisation
The data standardisation approach typical- ever-lower level are doomed to failure.
ly results in “death by a thousand maps”…
In seeking to align distribution data capture Given the slow progress on this at an indus-
with capacity provider systems allowing try level, it is an arms race that cannot be
“mapping” of one to the other and agree- won. The volume and sources of additional
ment of a common reporting standard. data available to underwriters has increased
massively over the last 5 years, while prog-
There are numerous problems with this ress on lower level standards has been gla-
approach including adding tension to the cial.
Agent/Insurer relationship via disagreements
over report formats and data capture, and Additionally progress in Graph Theory and
manual process due to the building of new Machine Learning has made any Standard-
maps and regular “re-mapping”. This is with- isation approach beyond a basic taxonomy
out considering that the industry has been obsolete.
working on common data standards for years
without much progress.
Too often Software Vendors treat variance as
a data problem for the Users to smooth out,
While a basic common taxonomy of risk (or not an engineering problem for the Software
premium or claim) entities is needed to facil- to resolve. Agents can reap significant bene-
iatate exchange, and ACORD have proven the fits from finding innovative Vendors tackling
appetitie and success for this approach, the the real problems rather than reheating old
attempt to drive common standards to an solutions.
“Automated Bordereaux” misses the point
Many Agent Core systems will output • Hold Ups – 1 item with errors holding
spreadsheets in more or less the format up multiple error-free items slows cash-
Insurers require, and consider the problem flow for all parties, and automated bor-
solved. However, there are still a number of dereaux don’t address this.
issues with this approach: • Version Control – when changes are
made as a result of errors and error res-
• The forgotten binder – Core Systems olution, managing the current version of
are “product-centric”: reflecting policy prod- the bordereaux is onerous, manual and
ucts with little to tie policies together or often unclear.
provide Binder-level processing.
• Resolution Management – workflows If your Core System provider suggests Auto-
for rerror esolution ofaren’t collaborative mated Bordereaux without addressing these
with other value chain partners and the state issues, the chances are they don’t under-
of a particular risk may be disconnected stand the real issues you’re facing.
across the chain.Your carrier is not an Archaeologist
Besides these unaddressed issues, there is forms and the use of digital aggregators and
the simple fact that even the most automat- Quote and Buy platforms mean that for a
ed bordereaux is a historic document, reflect- significant portion of business, bordereaux
ing the state of an account 6 weeks or more could be eliminated virtually overnight.
previously.
Where technology doesn’t allow for this, a
As the trend towards increased Usage Based flexible back-office system can deliver many
and Short-Term Insurances increase, bor- benefits of automation to even traditional
dereaux will become indefensible. Allied operations to keep them attractive to capaci-
Market Research cite a 2019 premium value ty providers.
for the UBI market of $28.7 billion in 2019
with forecast growth to $149.2 billion by
20271.
With policy terms measured in hours or
days, or with price/exposure switches based
on use over minutes (or miles), a reporting
cycle of weeks will not be sustainable. More
importantly, with all this data captured by
smart devices, de-digitising it into a monthly $149.2bn
spreadsheet should be seen as unacceptable.
The prevalence of API-enabled Agent plat-
1 https://www.alliedmarketresearch. Projected value of Usage Based Insurance premium
com/usage-based-insurance-market by 2027CONCLUSION
Bordereaux are holding you back
In a bordereaux world, users are interact- error handling.
ing with 100% of the data, often in low value
mapping and querying. This has never been an efficient process,
and it is now an obsolete process. Technol-
Back Office automation reduces this, ensur- ogy exists today to ensure that digital insur-
ing that effort is concentrated at high-value ance risks never need be de-digitised, while
tasks that resolve exceptions or are actions at the same time delivering the benefits of
based on insight. data separation and automated validation/
reconciliation to more traditional distribu-
A Back Office automation system that re- tors.
moves low value data handling task from the
agent while giving them transparent informa-
tion in an intuitive manner is transformation-
al.
The benefits are multiple and extend across
the value chain. An Agent with an automat-
ed back office supplies its carrier and broker
partners better, faster data. All parties benefit
from faster cash flow and less time spent in
Taking a different approach
Insurance as an industry moves slowly, and For agents, the benefits of effective back
bordereaux are embedded in the anatomy office automation that move away from tra-
of the sector – most contracts refer to bor- ditional bordereaux are clear, but the journey
dereaux frequency for example. to get there may not be so obvious.
With the industry unwilling or unable to Not everyone will be in a position to fully
move collectively overnight, any solution will eliminate bordereaux and “go digital”, and
require flexibility to provide maximum auto- even those who can may be constrained
mation while neither enforcing the unwilling by the technology of their carriers and the
to speed up nor the fast to slow down. “One clauses of their agreements.
size fits all” has failed.
However, there are 3 clear approaches thatagents, utilise to help minimise the negative
impact of bordereaux. These approaches
have the benefit of sharing positive im-
pacts with Brokers and Carriers while “fu-
ture-proofing” the Agent’s business and mak-
ing them ready to eliminate bordereaux as
soon as they or their partners can embrace
digital data exchange.
Use Data Models, not Bordereaux Maps
The difference between a “Data Model”, and the taxonomy of the entity (be it risk, pre-
a “Bordereaux Map” may not be obvious and mium or claim) and processes that separate
even seem like semantic nitpicking, but con- from the particulars of the actual ingestion
ceptually the two are worlds apart. format, including translation of different data
labels/identifiers.
In traditional “Bordereaux Management”
systems, “Bordereaux Maps” are spread- By such approach, a single data model can
sheet templates, mapping 1 field in an Agent be used for multiple contracts, even those
system to 1 field in a Carrier System and that receive and send data in different ways
usally driven by either the Carrier imposing (i.e. API and bordereaux).
their own structures or (as with Lloyd’s bor-
dereaux templates) the dubious wisdom of a A data-centric and flexible approach to
central committee. modelling risk, premium and claims entities
provides maximum ingestion flexibility.
Typically, 1 “Map” = 1 bordereaux version,
and each new contract or any change in the
When variance is treated not as a data prob-
bordereaux spreadsheet requires “re-map-
lem to be sent back to a user but rather an
ping” (and in extreme cases re-coding).
engineering problem to be solved via flexi-
bility and know-how, it is possible to move
It is common for Bordereaux Management
away from the “map and re-map” approach.
systems to fail to handle such common
spreadsheet features as total/sub-total rows,
split or additional header rows, changed col-
umn order or bordereaux starting on differ-
ent rows from one month to the next. These
require manual manipulation of the spread-
sheet or re-mapping of the “Map” before
loading.
By contrast, a Data Model approach outlinesData Separation is transformational
One of the most onerous burdens imposed for all time.
by bordereaux is the “all or nothing” ap-
proach, meaning every item on a bordereaux By providing a mechanism to decouple and
must be agreed for any single item to prog- recouple individual items within a bordere-
ress. uax, even non-digital traditional agents can
see huge automation gains.
It is common for a few errors on a couple of
rows to hold up a bordereaux with hundreds Validated data can flow through from dis-
of rows and potentially tens of thousands of tribution to capacity without any manual
dollars of premium. One Global MGA report- touchpoint, allowing speedy agreement and
ed that it typically took 15 submissions to settlement. In the meantime, issues can be
get a single bordereaux agreed and signed resolved without impacting the validated
through the London Market Bureau, while a entries.
typical lapse between policy sale and premi-
um/commission release was over 16 weeks1.
Recoupling the data allows “as-at” reporting
and provides the traditional bordereaux view
Data Separation flows from the insight that for anyone demanding “What did January
the joining of risks or transactions in a bor- look like?”
dereaux is fundamentally arbitrary. There is
no reason why these entries should be joined
1 distriBind Analysis, 2020
Management by Exception
In recognising that in the real world data to resolve. This is the result of effective Back
won’t be perfect, one accepts that automa- Office Automation.
tion won’t be 100%. The true goal of au-
tomation is thus ensuring low value tasks Traditional approaches to managing the
don’t swamp the user, reducing capacity for reporting of Agent data and the resolution of
high-value tasks. issues is manual, time-consuming and forces
Agents and Carriers to engage in low-value
Moving good data from point A to point B tasks. Agents who move beyond this ap-
is a low value task, ripe for automation. In proach will prosper by delivering the benefit
doing so, Agents are more likely to be able to of Back Office Automation to themselves and
truly add value by focussing on “edge cases” their Carriers.
where their expertise can speed resolution.
Bordereaux turn Insurance into Archaeolo-
Management by Exception is achieved by gy - it’s time they took their own place in the
maximising the automation of the good data past.
and making issues both transparent and easyTo discuss any of the issues outlined in this whitepaper, please get
in touch with CEO Dave Connors at dave.connors@distribind.io
distriBind for MGAs is a cloud-based SaaS solution offering Back
Office Automation and Straight-Through Processing for Insurance
Delegated Authority.
Find out about our solutions for MGAs, Brokers, and Carriers at
distribind.io
Copyright distriBind Ltd
Registered Office: 130 Old Street,
London, EC1V 9BD
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