15 years ago, last month, the statutory regulation of general insurance activities was introduced. I remember it well, as I had applied for CF1 permissions as the head of an insurance broking business. One of the key regulatory requirements was for authorised firms to have a written agreement with their insurance trading partners. Agencies were to be documented through a terms of business agreement, and overnight the acronym TOBA took its place in the insurance glossary.
All Hands To The Pumps
I remember this period well, the standout reason being that the process of producing, sending, negotiating and chasing up what for us was hundreds of TOBAs was a significant challenge. At that time the majority of firms were finding that the basic information they held was outdated and the process of updating this in order to issue TOBAs took weeks. Then came the production of the documents themselves. As one half of the office was busy learning mail merge in MS Word 2004, the other half were ordering letterhead, copy paper, envelopes and stamps. I’m pretty sure it took most of that year for the market to get all its TOBAs in place. There’s probably still a few outstanding to this day!
As time went on, firms began to introduce stringent due diligence process to vet proposed and existing trading partners. In a market that was striving for agility and innovation, the new regulations became known by some as ‘Revenue Restrictors’, ‘Profit Inhibitors’ and other terms that showed the frustration of a market struggling to get things done.
2021, The Way We Work Now
So, 15 years on, I thought I’d take a look at how things have changed. Firms now have a plethora of statutory and regulatory requirements to meet, as well as those of their trading partners, but applying for a TOBA is still the route to starting a new relationship. At the end of 2020 we conducted extensive market research covering opinions, use of technology and progression – and the results were eye opening! Here’s a couple of insights:
Analysis of the fuller research paints a picture of a market struggling to overcome the challenges and costs of B2B trading. As a result, Insurers limit the numbers of partners they trade with and seek minimum levels of premium throughput. At the same time, Brokers want to create new relationships, but often decide not to as processes take too long and they cannot always commit to overall premium levels.
This all begs the question, ‘Is the market missing revenue opportunities because B2B trade is too slow to start and too costly to maintain?’