Market Reform Forum Andy Brookes, MRPO Thursday 28 June 2007

Market Reform Page 2 Market Reform Update Developments in the past month –Contract certainty –ECF and IMR –Other projects –New information in bold Special topic - Market Reform Contract –Shortened version of the full MRC sessions

Market Reform Page 3 Contract certainty - Headlines Performance continues to exceed 90% target – April brokers achievement rate – 95%; …..in line with managing agent (95% May) and company data Standing down the Project Board Repeat of market survey August / September CC Guidance consolidation –Published 13 June –FSA welcome; may be formal recognition idc –Summary guide available –Whats different? document on website –No public sessions

Market Reform Page 4 Summary of the guidance re write Modifies the definition –Emphasis on formation, not inception –So late placement included (but keep monitoring it) One code applicable to the whole UK general insurance industry Timeless principles –Targets in guidance, not principles Requires firms to demonstrate performance –Verification against a checklist –Sample or File audits –System or Process controls Consistent structure; scope defined

Market Reform Page 5 The structure of CC 1. All terms clear and unambiguous including basis of participation 2. Contract Documentation provided to the insured promptly 3. Contract changes need to be certain 4. And documented promptly 5. Final participation provided promptly 5 key elements to contract certainty……. …. but demonstration of performance on 1 and 2

Market Reform Page 6 But dont relax on CC Demonstrate that contract certainty is embedded, no going back. Continue to monitor instances where contract formation post dates inception. We will update the FSA; but firm visits matter more Remember that contract certainty is still a regulatory priority and that the FSA has all the powers it needs And FSA care about legacy……

Market Reform Page 7 Legacy Measured by index number – volume as recorded in July 2006 is used as the base Target is to reduce the index to 60% by end June and 40% by end 2007 Lloyds index currently 54% May –Ahead of target –Based on Unsigned Policy Report from XIS IUA data now available; 74% April –On target –Based on data direct from companies to IUA

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Market Reform Page 9 Other placing related activity Contract quality: checking documentation, end of Stage 2 –Martin Roberts, LMA –XIS communications published New release of the Market Reform Slip –Steve Hulm to cover LMA picking up G6 work on electronic support for placing Testing certification facility –ACORD standards are key to reform –TCF now available as a means of insuring that your ACORD messages are consistent

Market Reform Page 10 ECF and A&S Lloyds ECF take up on track (just); up in June –6b in market testing from 18 th June; going fine –All binders, except co-lead, in scope IUA use of IMR for claims: tackling the barriers – service contract; functionality; costs; workarounds –See June Newsletter for details A&S use of IMR: disappointing –Will be MRG focus; reviewing end date for the van –Take-up will improve –It is not difficult - see June Newsletter article by Willis on DRI A&S Delinking –Hitting the target >50% by end H1 –Brokers individual reports commissioned from XIS –MRG reviewing end date

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Market Reform Page 14 Reform priorities in 2007: Half-time score Contract certainty – solidly above 90%: on track –March broker number 94%; insurers data similar –CC Code of Practice rewrite published; Market Reform Contract (= updated slip) published Legacy – mid-06 = 100; reduce to 60 by mid-07; 40 by end-07: on track –Lloyds reduced to 54% (May); –Company market initial measurement 74% (April) Electronic A&S submissions – 80+%: behind the run rate, but will pick up –©15 -20% at present –Rollout resources now in place for all brokers to go live this year Delinking – 80+%: on track –©50% in Q1 Error rate on bureau submissions – at least halved: under review –Inadequate data Electronic claims – 100% of new claims: on track, but demanding –Lloyds initial notifications: ©25% and rising –IUA companies coming on board; some already live

Market Reform Page 15 Other reform initiatives in 2007: Half-time score Placement – build on G6 work –LMA now leading in information dissemination –ACORD (implementation) standard developed –Suppliers very active Improve endorsements processing – pilot –Pilot well underway –© 20 insurers participating LMA led contract documentation improvements –Starts 1 July, with end of Stage 2 checking –Guidance published by Associations and Xchanging; MRC enables Test Certification Facility –Delivered by ACORD to help ensure messages are to standard Electronic policies –Xchanging delivering. Enables electronic out from XIS in response to electronic in Insurers Market Repository –Software Improvements delivered/on track (6a and 6b for claims; 2 and 3 for A&S)