When handling claims, DCAs play a critical role as the face of the Lloyd’s market to many of Lloyd’s policyholders, providing a core service and representing and promoting the Lloyd’s brand worldwide.
Lloyd’s has introduced changes to the way that DCAs are appointed and managed. These changes support improved policyholder outcomes and reduce operational expenses for managing agents and DCAs. From 30 September 2020 all DCAs require Lloyd’s approval before they can be appointed by managing agents to determine claims. Lloyd’s has put in place a standardised due diligence process for all DCA approvals.
These changes form part of Lloyd’s vision for delegated authorities: to create a seamless and well-managed ecosystem that enhances customer experience, making it easier, faster, and more cost-effective to do delegated authority business.
The DCA approval framework and process is summarised below. Full details can be found in the Guidance available here.
What is a DCA?
The Intermediaries Byelaw provides a list of who managing agents can delegate authority to in order to determine claims. Firms that are appointed by managing agents that do not fall into one of the other categories listed in the Intermediaries Byelaw require prior approval by Lloyd’s as a DCA. This will include most third party claims handling providers.
The following do not require approval as a DCA:
• Managing agents
• Law firms*
• Coverholders handling a claim on a policy the coverholder has underwritten
*Law firms that are appointed to handle claims do not need to be approved but should continue to be registered with Lloyd’s by informing email@example.com of their appointment.
Only firms that are appointed to ‘determine’ claims require approval. The definition of ‘determine’ means all claims handling activities necessary in order to (i) accept or deny a claim in whole or in part; (ii) agree any amount payable; or (iii) resolve finally any open matter by agreement or, if necessary, dispute resolution. Loss adjusters and other service provides that merely advise or support claims handling but do not have authority to determine the claim do not require prior approval.
What is the significance of Lloyd’s approval?
Managing agents are not permitted to appoint a DCA to determine their claims unless the DCA has been approved by Lloyd’s.
Once a DCA has been through the standardised due diligence process any managing agents wishing to appoint that DCA will use the centrally held due diligence information to assess the DCA and to support any decision to outsource claims handling to that DCA.
DCAs appointed prior to 30 September 2020
DCAs notified to Lloyd’s prior to 30 September 2020 under Lloyd’s previous requirements will not initially be required to go through Lloyd’s standardised due diligence and approval process and have been ‘grandfathered’ onto Lloyd’s register of approved DCAs.
During 2021 and 2022 all grandfathered DCAs will be asked to provide Lloyd’s standard due diligence information to onboard them onto the Delegated Compliance Oversight Manager (DCOM) system. Lloyd’s will confirm during this exercise that the DCA remains suitable to be an approved DCA. They will then be subject to Lloyd’s ongoing compliance oversight.
Lloyd’s will work with managing agents and DCAs to develop this process and more information will be provided in due course.
DCAs new to Lloyd’s
A managing agent that wishes to engage the services of a DCA that has not been approved by Lloyd’s should commence the approval process by arranging for the DCA to complete the due diligence questionnaire and provide supporting documents. The managing agent should assess this due diligence information to ensure that the DCA has adequate capabilities, systems and controls to provide the outsourced claims services required. Lloyd’s will carry out a risk-based overview of the managing agent’s assessment before approval is confirmed.
Once a DCA is approved it may refer to itself as a “Lloyd’s approved Delegated Claims Administrator”.
If a managing agent is considering appointing a DCA that is already approved the managing agent should base its decision on the due diligence information provided to Lloyd’s as part of the approval process.
Before appointing a grandfathered DCA that has not been through the standardised due diligence process, managing agents will need to undertake their own due diligence exercise.
Managing Agents that are unsure which process to follow should email firstname.lastname@example.org for assistance.
Click here to access a full list of Lloyd’s approved DCAs.