When underwriters grant brokers a period of credit in which to settle the insurance premium, this facility is offered based on the understanding that London brokers need a period of time after inception of the coverage in which to collect the premium through the intermediary chain. This is known as the settlement due date.
When processing premiums through Xchanging one of the premium payment reforms that is now extensively used is called “Delinking”.
In the past, this facility was not available therefore the submission of a premium transaction to Xchanging was only done when the premium was ready to be settled by the broker (ie. when the broker had received the monies from the client).
Delinking allows an early submission of the technical account which can then be checked by Xchanging technicians for accuracy and subsequent completion of the accounting record. Brokers can at times be inconsistent in the completion or accuracy of the technical account, and whilst their performance is improving, this extra time to check the account before the period of settlement pressure has become a valuable tool.
Delinking within the company market now represents over 75% of all premium entries processed by Xchanging and this has resulted in underwriters being paid more promptly on or around the settlement due date. Delinking will soon be mandatory for all premium entries with the consequent cash flow benefits to all underwriters being significant.
This reform represents a small but very important improvement in the accounting and settlement practices of the London market.
