The Electronic Claims File (ECF) is the centrepiece of the London Market’s efforts to embrace a digital world
The London broker tramping the trading floor of Lloyd’s with a slipcase full of claims files to seek agreement from one underwriter after another is one of the industry’s most enduring images.
But the practice could soon be relegated to history books as the Lloyd’s and companies markets have switched wholesale to an increasingly sophisticated electronic claims processing system over the past five years.
Its centrepiece is the Electronic Claims File (ECF), which enables brokers to send an entire claims file electronically to all insurers on risk at the same time, providing simultaneous access to a single, common set of documents.
The ECF, which was launched in 2006 and upgraded in 2011, can hold spreadsheets, scanned papers, photographs, videos and electronic documents in any format. The file is updated as the claim proceeds and stored for perpetuity in the Claims Data Warehouse.
It is the latest initiative in the drive to modernise the London market through the adoption of new technology that is being led and funded by the Lloyd’s Market Association (LMA) and managing agents and carried out by IT firm Xchanging.
LMA head of claims Tim Willcock said: “It was recognised back in the late ‘90s that everything was done on paper. Brokers were having to keep very large files and bring them round to insurers.”
Market leaders had realised that it was “a very inefficient way of doing things” and that introducing a technology-based process would bring efficiencies, savings and greater speed, he said.
The London market’s focus on high-risk, specialised, complex cover and its unique subscription slip system – evolved directly from the joint, mutual underwriting of ship-owners in Edward Lloyd’s coffee house – made it particularly challenging to computerise.
But drive gained impetus from pressure to boost profits and recoup the market share that Lloyd’s had lost over more than a decade in the wake of the asbestos-related claims as well as impatience with the market’s “Victorian pipework”.
The LMA joined forces with the companies’ market and broking community to adopt the London Market Principles for modernising four aspects of the market including claims and to outsource their back office to Xchanging in 2000.
Xchanging brought Lloyd’s into the Claims Loss Advice and Settlement System (Class) that already provided an electronic messaging service for the companies’ market and set up the Insurers’ Market Repository to store documents.
These provided the foundations for the ECF. The repository stored individual electronic documents, removing the need for expensive storage space for paper files, but the ECF brought them together into a single claims file, thereby saving time for claims handlers.
And, crucially, by providing simultaneous access to the claims file to all parties on the subscription slip, the ECF removed the need for brokers to go round the underwriters one after another seeking their agreement in person.
Subscription cover typically involves seven or eight underwriters and can involve dozens. In the companies’ market, all parties usually have to agree a decision, while at Lloyd’s up to three lead underwriters could make a decision on behalf of the others.
An Xchanging spokesman said: “Formerly, data would have to be rekeyed by multiple parties throughout the claims process. If a broker wanted to get a claim agreed by multiple parties, they would go and visit each of those parties and physically get them to sign and stamp.
“The underwriter would then enter their information on to the system and the broker would also update the system. As a result, you weren’t sure you had one single copy of the truth. With the ECF, there is no doubt as to which is the valid document.”
Willcock said the modernisation project had taken a long time to develop because there were “so many competing priorities”. “We have 58 managing agents, about 160–170 brokers and about 40–45 London companies,” he said.
“You have got to take all of them with you if you want to make progress across the London market. The turning point came in 2008, when we had 100% of managing agents using ECF and an increasing number of London companies and brokers.”
The ECF’s key effect had been to cut the average duration of the claims transaction – measured from the moment the insurer received the claim to the time they relayed a decision to the broker – by nearly two-thirds, said Willcock.
“In 2000, the average period for dealing with a transaction was 33 days,” he said. “But following implementation of the ECF, the transaction time is now 11.8 days. Other markets turn around in about 10 to 11 days and the London market is now turning around its claims at a comparable speed.”
Alongside the ECF, the LMA has launched a review of the Lloyd’s subscription system called the Claims Transformation Programme. Instead of having two or three lead underwriters as was often the case at Lloyd’s, insurers are now being told to appoint a single lead party for standard claims.
“We started phasing that in in 2010 and it was completed in 2012,” he said. “Any new claims coming in are now under this new mechanism for claims handling.”
London and International Insurance Brokers’ Association associate director Mark Knight said the percentage of new claims processed via the ECF had increased sharply for both Lloyd’s firms and companies in the International Underwriters Association (IUA) over recent years.
For Lloyd’s companies, 84% of new claims made in June this year went through the ECF, up from 66% in June 2009, while for IUA companies, 90% of new claims were submitted via the ECF compared with 51% in June 2010.
“It’s a big improvement,” he said. “It makes it a lot easier. It means you don’t have to cart large numbers of paper files around the market. And it’s a lot more robust as a storage facility. It is backed up and not at risk of fire, theft or being lost or mislaid.
“The only slight downside there is the possibility that you can lose some of the face-to-face connections and that is certainly a concern that people have in the market. You are not going out as much as you would have done in the past. But what electronic claims should not do is to stop people talking together. It is up to all parties to make sure that face-to-face contact is maintained”.
LMA claims manager Rob Gregg said the small percentage of claims that were still paper-based were mainly legacy claims from policies pre-dating the system and items such as co-lead binders that did not meet its security constraints.
“The plan for 2014 is to simplify legacy conversion via the Claims Transformation Programme and introduce the infamous ‘electronic rubber band’,” he said.
“This will allow the grouping and ungrouping of claims through the electronic process, which combats the security constraints and should lead to 100% of transactions taking place via ECF.”