Delegated Claims Authority - Performance Monitoring Minimum Standards
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. As reported within the market communication dated 5 August 2015, work progressed with full consultation with brokers to develop a set of coverholder minimum standards.
This element of the project relates specifically to coverholders 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 coverholders will dovetail with the standards for delegated authorities generally.
As part of a targeted thematic review conducted by Lloyd’s in early 2015, 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 coverholders:
Download: Coverholder Performance Management Information Indicators Template
The template (linked above) has listed 20 questions, under categories of Claims Counts, Performance, Communication and 3rd Party Adjuster Usage.
To reduce duplication of effort and with consultation with the market and brokers it was acknowledged that 14 of the fields responses can be obtained from other tools already in existence. For example the Lloyd’s Claims Standard Bordereau. To assist managing agents, a column entitled “Mapping” has been added to the template to inform where and how the information could potentially be gathered.
The remaining six fields which have been shaded in green, are believed to be questions that cannot be sourced from other tools available and will therefore be required to be requested from all coverholders on a quarterly basis as an absolute minimum.
Managing agents would then be asked to aggregate the data at a per contract (Year of Account) level and would be expected to also aggregate their contractual data in order to provide an overall view of the coverholder performance in respect of all contracts led by the relevant managing agent.
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 agents 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 coverholder (subject to compliance with Lloyd’s Conduct Risk Minimum Standards).
When delegating claims authority to a third party (including coverholders) Lloyd’s expects Managing agents to employ disciplined procurement and pro-active management procedures in the selection and use of such third parties.
Lloyd’s expect that managing agents shall:
- document due diligence completed to evidence that claims sign off obtained, requisite claims skills are in place, adequate resource available for existing & planned caseloads, system capabilities are satisfactory and that quality control programme exist for the classes of business to be delegated
- agree contractual terms, covering both the extent of claims authority and the level of claims service expected on those claims falling within authority, with such terms having been informed through the completion of the above due diligence
- maintain ongoing oversight of coverholder claims performance through the coverholder’s provision of contemporary claims data via both the expanded bordereau fields and management information advising on their performance against the managing agent’s agreed service levels for the remaining six ‘performance criteria’ fields on the template
- have a risk based audit regime in place which is flexible enough to consider prioritisation of audits on any third parties whose service performance has fallen short of expectations
- ensure their audit scope and subsequent reports can verify those areas initially confirmed within the claims due diligence remain in place, in use and effective so as to satisfy the claims service related terms of the contract including adequacy of resourcing and claims quality control.
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 coverholders. This is intended to help remove the inconsistent approaches by managing agents to coverholders across the Lloyd’s market and to reduce confusion for brokers and coverholders to what is required to be supplied by them.
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 coverholders.
Where no satisfactory alternative provisions exists, we would ask all managing agents to roll out these minimum standard performance indicators to their coverholders as soon as possible to enable them to start providing this management information by the target date of 1 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.
If anyone has any questions or would like further information, please contact Sharyn Butcher: email@example.com / 020 7327 8324.
Senior Executive, Claims