Regulatory requirements insist that a written agreement is in place between insurance businesses wishing to trade with each other. These terms of business agreements (TOBAs) are to detail the arrangements, responsibilities and requirements of the parties looking to trade. But who produces them and what are the common mistakes that lead to compliance breaches?
- It’s the Insurers problem!
Whilst it’s true that usually the product supplier (Insurer, MGA, Wholesaler) will issue the TOBA, both parties in the trading relationship have a legal responsibility to ensure it is in place. However, many brokers don’t keep an up to date register of their supplier TOBAs or review them regularly meaning they could be found in breach of both the contract and their regulatory responsibilities as the contracts expire or become outdated.
- The Pace of Change
Things change, and many TOBAs insist on notifications being sent for changes in circumstances such as a regulatory permission, ownership and even the locations where regulated activities are carried out. Can an insurer with thousands of relationships really expect all changes to be notified to them as they occur? A business facing serious financial problems isn’t likely to spend too much time notifying all their insurer partners.
- Cut and Paste
When creating new documents, many compliance professionals follow the manual process of finding and replacing latest version of the document and inputting new data where necessary. However, when recycling previously used documents it is impossible to keep track of versions and the likelihood of errors increases significantly. Recipients will not be impressed by outdated documents referring to outdated regulation, and if you accidentally include another firm’s data….
- That’s the way I’ve always done it
Having un-standardised processes could mean counterparties receive different TOBAs depending on the understanding of the issuing employee. With TOBAs often containing variables (such as terms of credit periods, commission rates etc.) it is not uncommon for Insurers to have many hundreds of versions. The likelihood of issuing the correct documents consistently is miniscule, causing compliance issues and creating confusion for the counterparty.
- The curse of the spreadsheet
Maintaining an up to date register of your trading partners is not straightforward. Simple data changes, such as a change of address, are easily missed, relying on one party to notify the other and records to be updated. With data held on spreadsheets and no clear ownership it’s no wonder any ‘mail merge’ document issue results in such poor returns.
Technology is the answer and RegTech is software used to ensure organisations manage regulatory processes correctly and efficiently. The best RegTech solutions enable Insurance businesses to remain fully compliant with regulation whilst delivering staggering efficiencies in cost, speed and accuracy.
The provision of verified, realtime eradicates the process of requesting information and waiting to be informed of change, leaving compliance professionals to act on the information their own surveillance provides them.
Thousands of TOBAs can be correctly issued in seconds, to the right people at the right counterparties and with task management, alerts and audit trails all automated, demonstrating effective compliance and governance becomes a simple task.