The faster payments revolution

INFRASTRUCTURE: CLAIMS SETTLEMENT Faster payments The revolution

As Lloyd’s of London prepares to roll out a new claims settlement platform across its delegated authority business, we talk to the CEO behind the payments company that architected it, Vitesse PSP’s Phillip McGriskin

Break with tradition:

Faster Claims Payment is a major infrastructure change for Lloyd’s

“Insurance is a very emotional subject. When people need that payout, it's because something has gone wrong. Getting their money to them quickly so that they can get back to where they were before the loss, is therefore one of the key features of an efficient claims process,” says Phillip McGriskin.

As co-founder and CEO of payments provider Vitesse PSP, he’s been helping insurance clients deliver those payouts since 2014 – but only as far as the industry’s systemically complex processes allowed. Ultimately, Vitesse wanted to find a way to leverage its global payments platform and automated treasury services to revolutionise how the money used to pay policyholders in loss fund accounts is managed. To do that, it needed to figure out a way of decoupling those accounts from the monthly reconciliation process and account top-up cycle that contributes to delays.

And now it has. It’s called Faster Claims Payment (FCP), a funding and payment solution that facilitates direct access for agents to insurers’ funds over the Vitesse platform. Developed with leading players in the London insurance market and delivered by market operator Lloyd’s of London, FCP goes fully live in September 2022.

Why is it such an important milestone? Because the vast majority of consumer complaints relate to claims handling – 68 per cent, according to financial information provider ValuePenguin’s report What Frustrates People Most About Their Insurer, and settlement delays were the second most vexatious issue. Delivering a good claims experience isn’t just a nice-to-have – it can make the difference between a customer staying or leaving at policy renewal. Zendesk’s recent CX Trends Report 2022 showed that 61 per cent of customers defect to a competitor after one bad experience. “We initially went to the insurance market to help

insurers make claims payments, as we are good at sending money around the world,” explains McGriskin. “But one of the insurers we approached was Brit Insurance, which is a significant player within Lloyd’s of London, and it said ‘look, we accept that we could pay our claims faster and more efficiently so that it would cost us less, and give better customer outcomes. But the burning issue that we have at the moment is making sure that the money is there to pay the claim’.”

Vitesse worked with Brit to find a solution, but it shared risks with other businesses in the Lloyd’s insurance market.

“It didn’t make sense for them to be paying their part of the claim instantly and waiting two-to-three weeks for everyone else to catch up,” says McGriskin.

And so the idea for FCP, hosted on the Vitesse platform, was born.

The idea so impressed Lloyd’s that it subsequently incorporated it into its Blueprint Two digitisation strategy, making the service available to every player in the market and, importantly, the delegated authority business, which represents 40 per cent of the premiums written at Lloyd’s.

The FCP solution allows delegated claims administrators – the client-facing third-party – to access funds directly from syndicates as and when required, reducing the need for the management of separate loss funds, and potentially eradicating them completely. That relies on clean, accurate and transparent data management, reporting and reconciliation by everyone in the chain – something else the Vitesse solution addresses.

Everybody benefits

Headquartered in the UK and regulated there by the Financial Conduct Authority (FCA) and in Holland by the Dutch Central Bank, Vitesse specialises in moving funds from A to B fast. It works with financial services, payroll and global mobility customers but is unusual in having developed bespoke solutions for the insurance industry.

“We have developed a global network of payment capabilities that allows us to deliver payments efficiently anywhere in the world, giving claimants choice and great payment outcomes,” explains McGriskin. “We put our treasury functionality on top of that to give our insurance customers real-time control and transparency over all the capital deployed across their claims estate and also enabling bespoke reporting and full user access/rights control. We overlay that network with regulation to give our customers and banking partners comfort and security that funds are held in appropriately regulated and safeguarded structures, which is typically an improvement on how funds have been held to date,” he adds.

With FCP, the Vitesse platform acts as an intermediary between delegated claims administrators (DCAs), managing agents, insurers and reinsurers, handling applications from DCAs for funds from a managing agent’s account and making the payment direct to the policyholder in local currency, using their preferred payment method. And the platform does that in hours, not days.

In the background, it's requesting and processing the accounting and reconciliation data in real time and ensuring the MA’s funds are continually replenished, so no time is wasted on top-up calls that could result in payment delays. Not only is the policyholder happy, but real-time lean management means the capital is always accounted for and the funds work harder.

The far bigger play for these larger insurers is around the capital wins, and being able to make more money on their money

“We’re talking about giving the managing agents within Lloyd’s up to 80 per cent of the loss funds they have typically had floating around in the market, back to them,” says McGriskin. “So, FCP provides excellent customer outcomes as Lloyd’s can pay claims faster than ever before. And, crucially, the members within Lloyd’s that are providing the capital to pay those claims, are able to make more efficient use of it.”

During its pilot phase, from July 2021 to April 2022, FCP delivered 5,512 payments totalling £15million, over 20 fully automated fund replenishment cycles.

“By January 2023, we would like to see the majority of managing agents have at least one or two binders up and running with this solution,” says McGriskin. “Once they’ve seen the efficiency, and how it works, we believe more businesses will load onto it. The way we have built and delivered the solution, it’s minimal work for managing agents and their downstream partners to get involved.”

Investing in new technologies can be risky in the current economic climate. With rising inflation and an impending recession, insurers and customers are all suffering from the pushback of austerity. The Financial Times reported, in late July, that the FCA had already warned insurers of the effects the cost of living crisis may have on consumers and their ability to keep up with premium payments. Against such a volatile backdrop, adopting a new claims settlement system may appear daunting, but it might just be the most cost-effective way insurers can mitigate loss and keep policyholders afloat.

“The cost-benefit analysis was the first thing we did,” says McGriskin. “Insurers operate on a dime, and there is no way they are going to buy something where they cannot see before they’ve signed that the money is coming back into the business.

“On the payout side of things, there are benefits around cost and customer outcomes – cost is quantifiable, customer outcomes slightly less so. But when you go into the treasury functionality of these businesses and you start to equate the cost of having a billion pounds sitting in bank accounts, when you could be using that money to create activity, it becomes a positive for us.

We are ultimately returning capital to insurers, which they can then use to write more business. We’re also bringing the funds into a more controlled and regulated environment, where the risk around those funds is decreased. And the ability to hold these funds in a singular environment enables us to talk with managing agents and customers about how we can optimise that capital piece with them,” he adds.

“The far bigger play for these larger insurers is around the capital wins and being able to make money on their money. We’re starting at Lloyd’s, but these problems exist across the global insurance market and that’s where Vitesse is headed.”