Article by Neil Baker, Divisional Director at Shepherd Compello
We live in an increasingly disrupted world. On the High Street retailers are fighting online providers, black cab drivers are in a spin from Uber and hoteliers have seen Airbnb push them out of bed with lower overheads. Insurance is no different since Google and Amazon have loomed, and are threatening to lead in the booming InsurTech space. Yet, for agile and entrepreneurial players there are opportunities, particularly in the area of delegated authority.
Building a partnership
The principles are straightforward and similar to other outsourcing business models. An insurer needs access to markets, but it is not cost effective or possible to invest in developing a team to write niche insurance business in every area of the world and potentially handle the claims. Therefore, the insurer looks to partner with a local insurance agent with specialist knowledge and expertise in a particular area. However, that is only the start of it – if an insurer is willing to hand over authority to write insurance business on their behalf, they will quite rightly want much more from their “coverholder”. Success can only be built based on trust and a long-term, mutually beneficial partnership satisfying client and ultimately the policyholder’s needs.
3 keys to a successful partnership:
1. A well-managed business.
Ok, but what does that mean? In practice, this means a philosophy built on being ethical, principled and compliant with regulatory requirements in a robust fashion. In turn, this is achieved by investing in experienced teams and structures.
2. An Entrepreneurial approach.
Underpinning the strategy there needs to be an entrepreneurial approach along with the ability to seek out profitable and sustainable business – often niche. It neither benefits the client nor the carrier or policyholder if all parties cannot be satisfied.
Something that can be a key differentiator when up against disruptors. Also, it is crucial because insurers need comfort that the coverholder has strong relationships built up over many years and have the specialist knowledge required. Equally, clients need to know that they are getting access to specialist insurance markets and products for their policyholders.
What is Delegated Authority?
A delegated authority relationship is formed when an insurer permits another party to act on their behalf, either in an underwriting or claims handling capacity. Where underwriting authority is delegated Lloyd’s refers to these as coverholders.
Coverholders represent an important distribution channel to the Lloyd’s market, with over 33% of Lloyd’s premium income sourced through delegated underwriting. (Source: LMA)
So how does Shepherd Compello help manage this successful partnership?
At a time when supply chains in every industry are under the spotlight, we have to be able to answer the question – what value do we add? Being part of that chain means leveraging our experience of the London Insurance market and our relationships with London underwriters and using this knowledge to facilitate the placement of a suitable binding authority agreement for our clients around the world.
A good example is how we help our clients in North America, particularly in Hurricane prone coastal areas, where local options are limited, by arranging a binding authority for them with London Insurers to allow our client to provide “catastrophe” capacity and insurance policies for coastal communities and businesses.
Importantly, we have also built our business at Shepherd Compello around the 3 keys to success, a well-managed business, with an entrepreneurial approach supported by a highly skilled and experienced team, which enables us to help our client maintain a long-term relationship with the London insurers they partner with and ultimately provide continuity for the policyholder.
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