New Data Standards Strive for Consistency, Accuracy in London Market

The potential of underwriting risks more accurately in the London market through the use of better and more complete policy information has driven the insurance industry to develop and implement new data standards.

That goal became a priority over the past few years for many U.S. and London firms and it is now turning into a reality with the recent implementation of new exposure and binding authority standards. Starting in the fall of 2003 several firms began using new Binding Authority Reporting and Exposure Reporting standards developed by the London market and ACORD.

With the initial wave of adoption over, the current status of the standards, and a review of the implementation process, will be discussed at American Association of Managing General Agent’s Automation Conference in New Orleans, La., March 14-16.

In addition, ACORD is seeking feedback on the current standards to see what changes need to be made in future updates, such as including liability coverage information in the standards.

The new standards utilize an agreed-upon set of requested data so that firms need to develop, or adopt, a single set of reports to provide policy information to the London market. In the past, firms may have had to develop a number of similar reports that went to different trading partners who requested slightly different sets of information.

In addition to simplifying reporting requirements, the new standards could help provide the market with better and more accurate information to use in underwriting risks.

Over the past few years many people in the industry realized the importance of having more accurate and useful data to use in rating risks, but the events of Sept. 11, 2001, made it clear, whether natural or man-made tragedies, the insurance and reinsurance industries needed a consistent approach to the provision of risk location data in order to establish the market’s exposure accurately.

Following Sept. 11, the London market started developing better information tracking methods to more accurately determine the level of risk and exposure. At first, there were efforts by individual firms to develop new programs to determine risk and exposure levels.

There was a need for a consistent approach to the way in which risk location data and insured values were presented if Lloyd’s syndicates were to continue to provide responsive and cost-effective cover to policyholders.

While several London firms started work on individual projects, many firms later joined together and brought in ACORD to develop one standard set of data requests.

Work on the new Binding Authority and Exposures Reporting standards started in the fall of 2002 as members of the London market and ACORD met to begin work on the process.

With the impact affecting many members, the National Association of Professional Surplus Lines Offices participated in the discussions and has helped keep members up-to-date on the process.

The meeting brought together various trading partners in the London insurance market to discuss the value of developing data standards relating to risks bound under U.S. Binding Authorities, and information relating to risk exposures by location. The goal of the meetings was to determine the information various parties needed in order to develop one set of data that all parties could utilize.

The process was driven by the fact that many firms were requesting similar information and the benefits of using one set of standards would be that firms, or software vendors, would have to just develop one report which could be used by multiple users rather than developing a report for each trading partner.

Consistency of data requirements across the whole London market also could help carriers and brokers transact business more easily. In addition, standards could make it easier for carriers to buy reinsurance if they could give better, more accurate risk exposure information to reinsurers. Plus, consistent data input can feed carriers’ catastrophe modeling software. Better information would allow more accurate estimation of Probable Maximum Loss (PML).

In addition, having a standard for reporting binding authority information would allow London carriers to continue and/or expand writing of binding authority business.

ACORD had been working with the London market since July 1, 2001, when ACORD took over the Joint Venture reinsurance and large commercial standards from WISe. There had been a desire in the London market for the adoption of standards, which delivered clear business benefits and met the goals of the market reform programs.

Following the November 2002 meeting, ACORD’s steering committee approved establishing a “working group” to develop the data standards. The group completed its work by the summer of 2003 with the adoption of the new standards by ACORD and a number of firms started implementing the standards with 2004 renewals.

The Binding Authority Reporting Implementation Guide accommodates the property and household lines of business for U.S.-based risks. The standard represents data on an as-at basis and includes location and value information.

Binding authority reporting had been raised because of a need for information on bound risks from managing general agents. In addition, information that is sent currently by MGAs has many differing formats, and completion of individual data items is not always consistent.

The Exposure Reporting Implementation Guide accommodates the property line of business (open market). This standard also represents data on an as-at basis, and includes location, values and limits/deductibles information for international risks.

While the initial work on the standards have been completed, the process is not finished. Once a standard was developed, existing software solutions and custom solutions used by brokers and carriers needed to change to reflect the new formats. In addition, future reviews are currently taking place to ensure all of the information needed is in the standards.

One change that is already taking place is work on adding liability information to go along with property. The current standards will be reviewed to see what additional information is needed. Industry members will also be contacted for input. Changes will be completed and approved in time for use in 2005 renewals.

Mike Ardis is director of communications & technology for the National Association of Professional Surplus Lines Offices. He joined NAPSLO in 1992 as communications coordinator and was named to his current position in February 2001. NAPSLO is a
national trade association representing the surplus lines industry and the wholesale insurance marketing system.