How insurers and clients can make sure they click
Time-consuming quibbles over insurance contracts may soon be obsolete as more people turn to online digital database facilities. Andy Bellinger explains Historically, the insurance industry has provided protection for business customers without finalising the precise contract details until a much later date after a formal agreement has been struck. Unsurprisingly, this practice led to disputes over what precisely had been agreed.
September 17, 2008 at 08:47 PM
4 minute read
Time-consuming quibbles over insurance contracts may soon be obsolete as more people turn to online digital database facilities. Andy Bellinger explains
Historically, the insurance industry has provided protection for business customers without finalising the precise contract details until a much later date after a formal agreement has been struck. Unsurprisingly, this practice led to disputes over what precisely had been agreed.
In response to this state of affairs, the Financial Services Authority (FSA) recently issued a directive to the insurance market to ensure all its contract wordings were in place before protection commenced. The aim of the directive is to offer greater certainty for buyers about what they have bought and to give insurers more security about the risks they are covering.
A big part of contract certainty involves ensuring that the client and underwriter understand exactly what is covered by a policy from the moment it comes into effect. This change in working habits will affect the financial position of many insurance companies that would previously have been unable to invoice for payment until the contract was finalised. In the case of major reinsurance contracts, such as those drawn up after the attack on the World Trade Center, this process could take upwards of 12 months to complete.
Reynolds Porter Chamberlain (RPC) is one of many law firms with an insurance speciality that has had to respond to the directive. Knowing its insurance clients would need to demonstrate contract certainty from December 2006 the firm developed an extranet to help reinsurers identify the legal risks associated with each component clause typically found in reinsurance contracts.
By using the market wordings database already in the public domain, and applying its legal expertise and market knowledge to each of the clauses, RPC's extranet enables reinsurers to access quality standard wording to fit each contract. My company, RedDot, assisted RPC with this project.
The system enables RPC's legal team to update the information directly to the site in a secure environment, removing the need for a webmaster and ensuring that those with the legal and reinsurance knowledge remain in control of editing the information.
The solution has been built featuring a specific clause matrix, defining the type and level of information that can be viewed by each audience segment – from RPC's internal lawyers, who enjoy a fully comprehensive view of the information, through to more limited views for certain customer profiles.
The extranet contains a methodology that allows clients to compare clauses and decide which is the most appropriate for their particular circumstance.
Since the extranet went live in January 2007, it has been successful for RPC and for the reinsurers using it.
Figures show that 17 subscribing companies have already signed up for the service, and more than 100 individual users are benefiting from it.
The system has helped RPC to meet its objectives of providing quick and easy access to a fully categorised listing of clauses and wordings for
its external clients.
It is also being successfully used on a regular basis as an internal tool by RPC's reinsurance lawyers to create wordings for clients and other related commercial contracts.
Julie Berry, IT director at RPC, says: "Our extranet is now saving our subscribers significant time and effort, enabling them to make an informed judgement as to which clause can be used. Information is easily searchable, and we have received very positive feedback."
The legal and insurance sectors have long been perceived as antiquated when it comes to administration. Images of large desks surrounded by thousands of case files spring to mind. However, this perception is increasingly becoming distanced from reality. Law firms are embracing technology more than ever to deliver better service to their clients.
As well as extranets and content management systems, we are also seeing a large number of law firms putting document management systems into effect. US firm Chambliss Bahner & Stophel recently implemented such a system to make pleadings, contracts, leases, deposition and transcripts more easily accessible. The stereotype of the paper filled law office is being put to bed.
Andy Bellinger is the country manager for RedDot UK.
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