Insurance Intermediaries continuously face the challenges of handling client money and the underlying problems associated with it. An adequate, credible, and scalable reporting framework and capability is critical to allow management to accurately measure the associated business and regulatory risks, ensuring that they are appropriately addressed.
Effective management of credit risk exposure is made more difficult due to the perennial challenges arising from unmatched cash, funding and the management of cash flows. In addition, the FSA requires firms to prepare client money calculations on a periodic basis, ensuring that the trust status of client money bank accounts cannot be challenged. The common practice of co-mingling Client and Insurer funds adds to these challenges.
In addition to reviewing compliance to the Client Money rules, the FSA is also keen to see the extent of unmatched cash and funding in a firm’s ledgers, and the extent of funds being held onto, and being paid on to, clients and underwriters. They are particularly interested to see evidence that management is measuring these items accurately and consistently, and that processes are in place to ensure positive trends in their clearance.
Concurrently, intermediaries are also seeking to understand their business in depth to help identify opportunities for improvements in profitability, capital management and cash-flow. This has been a key driver for much of the work we have successfully undertaken to date.
BIOLAP provides clients with expert solutions and experienced resources to ensure that they are effectively handling client money in a compliant, efficient and timely manner and, at the same time, evolving a greater understanding of their business.
Insurance Ledger Diagnostics
Although most broking systems provide adequate processing, they often lack the capability to produce critical management information. At BIOLAP, we have developed a data mart solution for broking systems that allows the easy, quick and accurate analysis of funding, unmatched cash, uncollected brokerage and balances held for payment contained within the insurance ledgers. Whilst most broking systems split transactions between client, underwriter and third party ledgers, these balances are reconstituted by the Diagnostic.
Greater transparency is gained across the ledgers leading to better managed and reduced credit risk and bad debts, improved cash flows and service to clients and underwriters, earlier recognition of potential exposures and processing errors and a reduction in and quicker resolution of open entries.
In contrast to many data warehousing approaches, our proven methodology is specifically designed to deliver results from the outset of the project, implementing a scalable and flexible framework that can be continuously developed to respond to an organisation’s growing appetite for management information once the possibilities are understood.
BIOLAP provides experienced resources to assist in the clearance of legacy issues relating to funding and unmatched cash. By utilising specialist resources to assist in the clearance of these items we help to ensure minimal impact on the servicing of ongoing business. In addition, we can help to identify recurring problems and help to design improved processes to prevent their future reoccurrences.
Clients using our Insurance Ledger Diagnostic in conjunction with our clean-up methodology have experienced sustainable improvements in their open ledger entry positions over a 12 month period:
- Unmatched Cash (reduction between 44% and 55%)
- Funded Balances (reduction between 45% and 62%)
- Uncollected Brokerage (reduction between 12% and 39%, freeing up working capital of £2m).
To download the article in PDF format, please click here.