Lloyd's Market Association Bulletin

LMA15-038-RG  |  5 August 2015

Delegated Claims Authority - Performance Monitoring Minimum Standards
Third Party Administrators (TPAs) Only 

During the first half of 2015, the LMA facilitated a market project on behalf of the Binding Authority Claims Group (BACG) to deliver a set of minimum standards for claims performance monitoring and reporting by TPAs to the managing agents that have appointed them.

This project relates specifically to TPAs but is relevant to the work being carried out in relation to management information standards under Lloyd’s Conduct Risk Minimum Standards and also to requirements under Solvency II and of the FCA in respect of outsourcing. The intention is that the standards for TPAs will dovetail with the standards for delegated authorities generally.

As part of a recent targeted thematic review conducted by Lloyd’s, which included a specific focus upon Delegated Claims Authority Management, gaps were identified in relation to performance/SLA monitoring and oversight of third party delegated claims authorities. In response to this, this project was formed.

Lloyd’s has been involved in this project and has agreed that the attached performance management information indicators spreadsheet should assist managing agents' oversight of the claims performance of their TPAs: 
Performance Management Information Indicators

Lloyd’s has also advised that these indicators are not envisaged to be mandatory. However, where no satisfactory alternative provisions exist, then the attached performance indicators should be used by managing agent as a minimum. These should also help determine the applicable and appropriate claims service levels in respect of the class and territory of the claims handled by the TPA (subject to compliance with Lloyd’s Conduct Risk Minimum Standards).

Lloyd’s has also asked that we remind managing agents that in order to evidence their adherence to Lloyd’s Claims Principles and Minimum Standards (CPMS) 6.1.1 - 6.1.4., Lloyd’s expects managing agents to be able to:

  • document how due diligence has been completed to verify that the requisite claims skills, resources, processes and controls exist for the classes of business to be delegated
  • have contractual terms agreed, which cover both the extent of claims authority and the nature of claims service expected on those claims falling within delegated authority
  • regularly monitor claims service performance through the third party’s provision of claims service management information to the lead Managing Agent
  • ensure a risk based audit regime is in place and is flexible enough to consider prioritisation of the scheduling of audits on any third parties whose service performance has fallen short of expectations.

Lloyd’s has also emphasised that managing agents should explore how they can use the results of TPAs’ own quality control mechanisms such as peer review programmes/internal audits to help confirm that the performance of TPAs meets managing agents’ requirements. These internal control frameworks have the potential to provide relevant qualitative and performance related information to support efficiently managing agents in meeting their performance oversight obligations.

Lloyd’s and managing agents recognise there is a commercial and governance related value in having a consistent minimum set of claims performance related management information for TPAs. This is intended to help remove the inconsistent approaches to TPAs across the Lloyd’s market and to reduce confusion for TPAs.

Therefore, the objective of this project is to enable managing agents to have satisfactory sight of, and sufficient monitoring of, local performance in the most efficient way and reduce the amount of additional demands on TPAs as much as possible.
The performance management information indicators spreadsheet contains three templates lists and defines the minimum performance monitoring reporting standards for each jurisdiction that have been developed to cover TPAs in each of the following jurisdictions: EEA (which includes UK); Rest of World; and United States.

Key information includes:

  • information on the level of reporting – Aggregated data is to be provided at a per contract (Year of Account) and at a rolled up aggregate for each managing agent for that TPA
  • the frequency of reporting – would be requested on a quarterly basis as an absolute minimum, but where high risk products are involved, it may be worth considering monthly
  • an introduction to minimum market SLAs where applicable.

Next Steps
Where no satisfactory alternative provisions exists, we would ask all managing agents to roll out these minimum standard performance indicators to their TPAs as soon as possible to enable them to start providing this management information by the target date of 01 January 2016. The LMA and BACG have committed to work with all parties to ensure that we are fully engaged with some of the challenges being faced.

Delegated Claims Authority - Performance Monitoring Minimum Standards Coverholders Only

Work continues with regard to the coverholder minimum standards and a period of full consultation with the broking and coverholder community is now underway. Lloyd’s and the LMA are fully aware of the commercial sensitivities that surround this project and as such will work closely with all parties to ensure the best possible outcome.

If anyone has any questions or would like further information, please contact Robert Gregg: robert.gregg@lmalloyds.com / 020 7327 8404.

Robert Gregg

Head, Claims