Barry Scott, Managing Director of Fulcrum Collections
They say that necessity is the mother of all invention. Continuous improvement and surveying of client needs almost always uncovers opportunities to innovate and disrupt traditional models of business. This is exactly what Fulcrum did in the collections space. “Fulcrum AirCollectTM is a first for South Africa – and quite possibly the world.
Fulcrum Collections has traditionally processed premium collections via its own bank account (the legacy model). This has resulted in a large premium liability to insurers. The existence of this liability had become unacceptable to insurers, more so recently with the curatorship of Insure Group Managers in August 2018.
The Financial Sector Conduct Authority (FSCA), in
terms of the Retail Distribution Review (2014) and their latest position papers (December 2018 and April 2019), has signalled intent to further regulate the outsourced premium collection industry, to the detriment of the legacy model. It is anticipated that premiums will need to be collected directly into insurers bank accounts or paid across to insurers within three days.
The transition from Fulcrum Legacy Collections – Fulcrum CollectDirectTM – Fulcrum AirCollectTM
In response to the proposed regulatory changes, and in anticipation of decrease in insurers’ risk tolerance, three years ago Fulcrum developed the Fulcrum CollectDirectTM model of premium collection. In terms of this model premium is debited directly from the policyholder account into an insurer bank account, thereby de-risking the process for insurers. This was piloted with a single insurer and is now deployed at the majority of client insurers. This model has been widely accepted by insurers.
While the initial version of Fulcrum CollectDirectTM has achieved the objective of derisking the premium collection process for insurers, there are areas which require improvement.
In order to improve efficiency for clients and Fulcrum, and improve levels of service, Fulcrum Collections developed a new concept of direct collections called Fulcrum AirCollectTM. In terms of this concept, premiums are debited from the policyholder using granular information from the source policy administration systems.
These premiums are processed as a single debit, including net premiums due to insurers, commissions, fees, and VAP components, however the debit is pre-processed before reaching the insurer bank account, and the individual components of the debit are directed into separate bank accounts.
AirCollect presents the following improvements to CollectDrive:
- Payments do not need to be released by the insurers. There is no risk of untimely commission and VAPs payments.
- VAP payments are not processed into third-party insurer accounts, this risk is therefore mitigated. The extent of the VAP business is not visible to the primary insurer.
- Fulcrum becomes independent of broker bordereaux.
- The administratively complex balancing process performed by Fulcrum and brokers is removed.
- Brokers commission is not collected into insurer bank accounts.
- AirCollect will be far more efficient than the current version of CollectDirect, for both insurers and intermediaries.
- The solution can accommodate annual premiums (deposits).
- The solution can accommodate large coinsurance policies.
By taking unnecessary complexity, time, cost and risk out of premium collections, Fulcrum AirCollectTM supports both insurers and intermediaries alike to be more sustainable and efficient – allowing them to focus on what they do best: providing policyholders with great insurance cover and service.
We’re proud to have developed this world-class platform for our clients, confirming our position as an innovator and leader in premium collections, and we’re very excited about the positive impact it will have on their businesses.