Global programmes by their nature can often be complex, and digitalisation can most certainly help to streamline effort, but are the benefits being realised?
Alain Throo, senior manager global programme advisory, global programmes centre of excellence at AXA XL, believes so. “It allows carriers to put robust controls in place, particularly around operational processes,” he said.
“For instance, in the recent past you may have followed processes via email (for example, with network instructions), but digitalisation offers a whole new spectrum to maintain your processes in a robust type of way (for instance, via end-to-end workflow) and manage global programme portfolios for insureds, insurers and brokers,” he added.
Martin Drux, multinational and Asia client service leader, continental Europe, Marsh, agreed, adding: “Digitalisation has helped to reduce many of the complexities and improve efficiencies around global programmes. Many leading insurers have introduced digital tools that provide oversight of local policies through a global lens.”
However, there is still quite a journey ahead. Mr Throo said: “Overall, I believe there are three levels relating to the transformation of technology: ‘evolving’, ‘matured’ and ‘optimised’. And I think that in many ways we find ourselves in the evolving level, where technology and digitalisation are clearly identified as game-changers but are at the early stages of adoption.
“With that in mind, some of the technology out there may be too advanced for the purpose of insurance companies today or, at least, for the use of global programmes, but that’s not to say that we won’t get there… or even need to.”
He sees a future where digitalisation in the global programme space will be around “computable contracts”, where data models allow policies to be created via digitalised libraries containing digitalised clauses.
“This technology not only enables automation of policy issuance, it would also allow for more robust portfolio analysis and wording governance. We believe that the use of such a technology will provide great value to our clients and brokers,” he said.
Change is on its way, said Carolina Klint, risk management leader, continental Europe, Marsh. “In the last two years in particular, there has been an acceleration in digitalisation to support the management of global programmes. This is helping to improve consistency, efficiency and the pace of communications surrounding the day-to-day functioning.
“The pandemic has also contributed to this acceleration. Perhaps even five years ago it would have been inconceivable to be able to manage a global programme from the home office. The pandemic has accelerated this speed of change and progress, making the unthinkable now easily achievable.”
But risk managers still face challenges around complexity in terms of their programmes. Mr Throo offered some tips about how to better manage the process. He suggested: “It is a major advantage to carry out as many activities as possible during the pre-bind phase. Having an open dialogue early on and ensuring the different parties are all in agreement (insured, broker, insurer) makes a massive difference.
“This starts with the creation of a compliant structure where all necessary aspects are taken into consideration to satisfy the client’s needs. In my experience, the earlier the conversation among the different parties, the easier the implementation and fewer surprises there are likely to be down the road.”
He also acknowledged that it is important for the carrier to be as transparent as possible with the broker and client. “Additionally, local regulations are becoming increasingly challenging and it’s therefore crucial for carriers to proactively communicate any potential issues with their brokers and clients. For example, many countries require ‘know your customer’ documentation before any policies or invoices are issued.
“Providing this information proactively during the pre-bind phase to clients and possibly even the forms they have to fill out allows them to share this information with local colleagues in the respective countries to be ahead of the game,” he said.
Again, Mr Drux agreed, saying: “Managing a global programme successfully requires a strong tripartite relationship between the client, broker and insurer. If there is a fundamental misalignment with the client strategy, then confusion can quickly mount and threaten the programme’s overall success.”
“By their nature, global programmes are inherently complex,” added Ms Klint. “To understand and mitigate some of the complexities, collaboration and clear communication are critical, for the benefit of the client.”
Accountability comes in the form of contractual agreements, KPIs and service level agreements. However, fundamentally, trust lies at the heart of a successful client-broker-insurer relationship. The role of the broker in a global programme is to act as the client advocate; this means monitoring progress, picking up on issues on the client’s behalf and working with the insurer to iron out any issues. Some insurers are now working with digital teams to monitor their performance, through the use of pulse surveys and other tools.
Part of that transparency comes in the form of contract certainty. Ailsa King, chief client officer, UK and Ireland, Marsh, had bad news: “Despite great efforts across the industry to improve contract certainty, the challenging market conditions that have prevailed for the last two years have actually resulted in contract certainty far from improving, and actually deteriorating in some places.
“Members of Marsh’s UK client council – which brings together our largest global clients – have regularly commented on their frustrations with carriers on contract certainty. One client – a global bank – recently drew comparisons to their own industry: as a mortgage provider, it simply cannot provide the documentation required by clients at the 11th hour, but carriers can – and do.”
Ms King added: “We share this frustration with our clients; we are working with carriers to get ahead of certificate issuance and policy terms and conditions, ahead of renewal date, so that clients have a clearer picture of their coverage, which enables greater contract certainty.”
However, Shiwei Jin, global programmes and captives regional director APAC at AXA XL, believes things are changing. “The industry has been tackling the issue of contract certainty mainly from two aspects: to ensure speedy and effective local policy issuance; and to have centralised control and transparency of local policy coverage,” she said.
Ensuring local and effective local policy issuance, she suggested, starts with ensuring proactive management during the pre-bind phase, as Mr Throo outlined previously.
“In particular, it’s important for global programme carriers and brokers to work closely with clients to undertake deep dives into challenging countries. For example, those where local regulations are challenging or ever-changing on issues such as exportability, premium payments or local pricing requirements,” said Ms Jin.
Once bound, she stressed, it is critical to issue final, complete and accurate instruction across the network as early as possible from the master insureds, insurers and brokers to the local policy parties. A clear communication protocol on how to address local changes relating to local policy instruction is needed to avoid lengthy communication.
After instruction, holistic programme management from the master side throughout the entire local policy network is critical to ensure ‘cash before cover’ and other regulatory required premium payment terms can be fulfilled on time, and policies can be issued before, or as close as possible, to the inception date .
Ms Jin suggested that regular programme implementation calls and status reporting are required, which clearly identify pain points and action points for each party, to achieve transparency and efficiency so that they can achieve contract certainty across the programme. “A global programme is like a dragon boat rolling,” she said. “All parties need to be clear where they are heading to, how they are getting there and be crystal clear with one another along the way.”
As she outlined earlier, success also involves having centralised control and transparency of local policy coverage. “Traditionally, global programmes’ local policies are issued on a ‘good local standard’ basis. To decipher good local standard is a key part of achieving contract certainty. Some carriers are implementing consistent local policy wordings or forms across major countries for certain products, while others are building a comprehensive database of good local standards,” explained Ms Jin.
Certain clients require that a manuscript wording be implemented in local policies, she added, saying: “Manuscript wording or a manuscript policy is one drafted wholly or partly for the specific use of one insured. There are many types of manuscripted insurance agreements. For example, some have specific bespoke amendments to standard form wordings by endorsement. In other cases, one wording combines different products that usually would be issued through separate policy forms.”
To conclude, Ms Jin top tips included:
- Whether a manuscript wording is allowed or not could depend on the details of the manuscript wording. For instance, in certain markets, while a manuscript wording for general property is allowed, the local regulator might not allow including terrorism, as terrorism must be provided through a standalone policy.
- Consider whether any regulatory requirements might be triggered, such as translation into local languages, legal review in order to ensure locally required clauses are included, filing and/or approval of the regulator. For example, in France, Mexico and most of the Latin American countries, policies can only be issued in local languages. In Brazil, China and South Korea, wordings including endorsements must be filed with the regulators in local languages.
- It is essential to have a pre-bind engagement with all local countries to review and confirm the required manuscript wording, as well as time and resources needed to enable localisation of the manuscript wording.