PROFIDA ready to assist with new binder regulations

New binder regulations, which became effective at the beginning of this year, have brought significant changes to the way in which insurance industry stakeholders conduct their business.

“With significant implications regarding the storage and sharing of policyholder data, the regulations have impacted the financial models of businesses involved,” said Daniel Putra, Managing Director of the PROFIDA Team, a software company focused on financial services and the insurance industry.

A binder agreement is between an insurer and a third party, usually a broker, administrator or underwriter, in terms of which an insurer mandates the binder holder to perform on its behalf certain functions relating to the administration of insurance policies and subsequent claims.

Amongst the new regulations, said Putra, is that insurers must have all policyholder information in their records, which must be updated by the binder holder at least every 60 days.

“In the past underwriting managers (UMA) and broker administrators exchanged information via an excel spreadsheet stating policy numbers, policyholders’ names and premiums collected. Only at the stage of a claim would the insurer be informed about additional policy details.

“This is no longer sufficient as insurers need to have all the details including sums insured, endorsements and claims history,” said Putra.

UMAs and broker administrators also need to keep the insurers updated about changes to contact details, addresses and amendments to the policy.

Implementation of the new regulations has been complicated by the fact that the systems used by industry stakeholders have different underlying databases, field structures and technology, making the direct exchange of data unfeasible.

However, to standardise the way data is transferred, PROFIDA has implemented a widely used South African technology standard, which its users can apply immediately to facilitate sharing policyholders’ data.

PROFIDA is also working on integrating with other options like the international standard, ACORD. This will provide better cost management, greater efficiency in the value chain and real time transaction capability.

Said Putra: “Integration with these standards is enriching the already extensive importation facilities based on CSV and XML within PROFIDA, which allow users to import policy and underwriting data on an ad hoc or regular basis.”

Another change introduced by the new binder regulations that impacts on insurance management systems is that UMAs can no longer charge fees over and above the gross written premium. This means that existing fee structures need to be investigated and changed for policy issuance, premium and fee collections, as well as for the financial accounting side.

These and future changes require system flexibility to alter fee structures. PROFIDA is able to meet this need as different commission and fee structures can be easily changed.

The PROFIDA Team will be exhibiting at the insurance conference, hosted by the Financial Intermediary Association (FIA), the Insurance Institute of South Africa (IISA), and the South African Insurance Association (SAIA) at Sun City from 10 to 13 June 2012.