There used to be a term in London called run-off, now we call it legacy. Either way it needs to be managed and now we see this needing more sophistication than ever before.
The Market Reform Group’s agenda includes the market’s legacy as its prime retrospective consideration.
Legacy comes in many forms – un-paid premiums, un-issued wordings, outstanding claims or even those incurred but not reported. Very few insurers or brokers in London have no legacy issues. The challenge is to stop the legacy pile growing and manage it downwards.
The first task is evaluate the scale of issue. Once measured it can be tackled. The market has responded in the area of legacy wordings such that over 60% of un-issued policies have been addressed and the market’s target is to exceed 80% by year end. Claims legacy can be better handled through improved systems and processes and the ECF system will assist greatly especially when it can cater for legacy claims.
The bottom line on legacy is that for a trading company, poor management of it will affect the bottom line. Poor credit control, holding redundant reserves, slow handling of claims or un-issued wordings can all cause operational losses that need to be avoided. This has become an important issue for Boards to deal with otherwise the past will affect the future.
