Collaboration for compliance
In the financial services sector, insurers and their intermediaries have to work together to attain compliance.
JMR Software’s insurance subject matter expert Jake Solomon explains the significance of recent changes to the legislation around data management in the insurance sector. “Intermediaries sell insurance and provide policy administration activities on behalf of an insurer. All correspondence and complaints are also managed by the intermediaries. However, according to the Policyholder Protection Rules, the insurer is ultimately responsible for all the policy services provided to the policyholder. Further complicating the relationship, changes to the Policyholder Protection Rules on Data Management require the insurer to be given access to policyholder data that’s up to date, accurate, reliable, secure and complete, which means that the insurer needs a better way to view and control the policy data that’s kept by intermediaries.
All policy-related data is kept by the intermediaries on their own systems and/or spreadsheets and currently, the insurer's view of the policy information and associated policy risk exposure is minimal. Going forward, intermediaries need to have a mechanism in place to continuously provide the insurer with all the required information as and when required.
The data management requirements under Rule 13 include policyholder information such as the name, ID number, mobile number and email address. The intermediary has to make this data available to the insurer so that if, for whatever reason, the intermediary is unable to service the policyholder, the insurer can continue servicing the policyholder without a break in service.
The insurer must also be able to access a consolidated view of the product portfolio, the associated performance and risks associated with each of the policies, including loss ratio, estimated claim payout amount and complaints. Solomon elaborates: “The insurer doesn’t only need access to the intermediaries’ system, but also all policy, claims, communications and complaints information.”
He goes on to explain how Rules 16, 17 and 18 are interrelated and how they impact Rule 13's data management requirements. “Rule 16 discusses the need for record keeping of communication records, so all policy related communication such as SMSes, e-mails, documents, policy schedules, endorsements, claims, settlements and decisions. Rule 17 covers the claims management information that must be provided. This is information such as the claim status, claims received, claims open, claims repudiated and the claim outstanding amount. Then Rule 18 discusses complaints management information, such as categorising the complaints, number of complaints received, rejected or in progress.”
It’s important to note that the above-mentioned information is an integral part of the policy data management requirements under Rule 13. Intermediaries need to ensure they have a system in place that provides the insurer with the relevant data as well as access to policies, claims, complaints, communications and policyholder information, while the insurer needs a system that can retrieve and store all of this information.
Solomon points out: “The onus is on the insurer to ensure that all intermediaries are continuously providing all of this information, and that the information is up to date.”
In order to comply with Rules 13, 16, 17 and 18 of the Act, the intermediary needs a system that’s able to provide the insurer with the required data in the required format. Solomon says there are five main functionalities that such a system should provide:
- The appropriate access to all policy, claims, communication and complaints information required on the system.
- Automatically provide the appropriate information in real-time, daily, monthly or as required.
- The ability to automatically provide all communications such as quotes, policy schedules, SMSes, e-mails, documents, endorsements, claims details, claims statuses, settlements and decisions as they occur.
- The ability to integrate the insurer, intermediary and other relevant stakeholders into the complaints process. Or the ability to manage complaints by either integrating into the existing business application system or as a standalone system.
- The ability to store and retrieve documents, information and statuses from the system’s integrated workflow and document management components.
However, compliance with Rule 13 is not without its challenges. Solomon says: “Different insurers may require different data to be transferred and for the data to be structured in a precise and specific way. There’s no standardised method or one solution for everyone. Each engagement needs to be customised and the data needs to be tailored for each intermediary insurer solution. Also, additional mandates may need to be in place to pass the additional policyholder information (personal information including banking details) to the insurer to comply with regulations such as POPIA, for example.”
Where insurers need to take over premium collection and payments, they may struggle to track the financial transactions. This requires maintaining a transaction-based policyholder account where additional information such as the last premium date collected, premiums raised, premium collected, unpaids, double debits, broker fees, binder fees and other fees needs to be collated.
Finally, to further complicate matters, some short-term insurers are exempt from Rule 13. Solomon says: “While Rule 13 of the Policyholder Protection Rules (PPRs) issued under the Short-Term Insurance Act (STIA) came into effect on 1 January 2020, the FSCA published a notice providing for the exemption of certain short-term insurers. Where Rule 13 requires an insurer to have access to the names, identity numbers and contact details of all its policyholders, a practical challenge exists for insurers that offer transport policies from complying with Rule 13 insofar as it relates to collecting the identity numbers of policyholders. Such policies usually use a waybill number as a unique identifier for a policyholder instead of an identity number. Those insurers have now been exempted from Rule 13.4.”
Solomon says: "The only sure-fire way of addressing all of this complexity – and for insurers and intermediaries to be certain that they’re compliant – is to work together and to partner with the right Policy Administration System (PAS) solutions provider to overcome these obstacles. Intermediaries need assistance to deploy, integrate and configure their existing solution and data onto a fully compliant PAS. They may also require help with the best strategy to provide insurer with the required data in real-time, daily, monthly or as required.
“Insurers and intermediaries alike require a best-fit policy administration system that’ll ensure data gathered by intermediaries can be provided to insurers in a structured and specific way as requested by insurers. It’s now time for intermediaries that may have legacy or even no systems, and who are working off Excel spread sheets, to migrate to a system that keeps accurate, relevant data on hand. The changes to Rule 13 could prove a game-changer in this sector, driving insurers and intermediaries to digitise in order to gain a competitive advantage.”
Solomon adds: “It is vitally important that from the onset, companies investigate their Policy Administration Systems’ ability thoroughly. Making a sound investment from the onset can ensure you save time, money and enable rapid growth and development in the long run.” He recommends looking for a system that is highly configurable to the business’s needs, scales easily to grow with the business and is capable of launching new insurance products quickly.