Chapter 9 - Delegated Underwriting

Question 1

What business process would brokers usually delegate?

Answer 1

Document production

Question 2

What are the two contract types which insurers delegate to other insurers?

Answer 2

Consortium and Lineslip

Question 3

What are the 3 key features of a consortium contract?

Answer 3

Group of insurers accept risk in a pre-agreed way
Consortium leader negotiates on behalf of all and handles claims
Lasts for a year, identified by unique 4 letter code

Question 4

What are the 4 benefits of a consortium contract?

Answer 4

Shorter placing process
Consortium leader get commission
Followers get access to business without needing to visit a broker
Smaller admin task

Question 5

What is a lineslip contract and how does it differ to consortium?

Answer 5

Group of insurers are brought together by a broker agreeing on a risk

Broker decides how to place risk (i.e. in open market or through lloyds)

Question 6

Why would a lineslip only have 1 insurer?

Answer 6

Broker can process risks in an aggregated format

Question 7

Why would a lineslip have participants with no delegation?

Answer 7

Broker can say that they already have a pre-agreed group of insurers

Question 8

What are the main benefits and disadvantages to a lineslip?

Answer 8

Broker can place more efficiently
Insurers access business without having to place risk themselves
Lead does not get commission

Question 9

What do the following terms mean in a lineslip?
Declaration, Bulking, Facility

Answer 9

Declaration: Individual risk being presented and attached
Bulking: Processing premium in bulk
Facility: Another name for lineslip

Question 10

Why would a company use delegated underwriting? (3)

Answer 10

Manpower
Access to local business
Access to other business outside of London Markets

Question 11

What does coverholder mean in delegated underwriting?

Answer 11

Partner in the DUW agreement, holds authority under a DUW agreement

Question 12

How would a broker manage a conflict of interest?

Answer 12

Split team so that the DUW team does not have contact with insured. Only insurers

Question 13

What is an MGA?

Answer 13

A coverholder who only has contacts with insurers

Question 14

What are the requirements for a new coverholder? (types of info)

What criteria would the managing agent consider? (4)

Answer 14

Needs approval from Lloyds, types of work, geographical location

Consider:
Experience, Controls, Financial status, underwriting authority

Question 15

What is the system for coverholder application and how long till approval?

What is the coverholder undertaking?

Answer 15

ATLAS, 25 working days

Set of agreements expected by Lloyds, reviewed annually

Question 16

What are the two types of coverholder in Lloyds? What are the differences

Answer 16

Service company, approved coverholder

Service company - setup as separate company, underwrites business as binding authority from syndicate. Usually participates in personal lines

Question 17

What are the 4 types of authority?

Answer 17

Full authority
Predetermined rates - price matching allowed on rewneals
Predetermined rates with no discretion - No change allowed from pricing matrix
Prior submit - all risks reviewed with UW

Question 18

What are the 3 parts of a binding authority agreement?

Answer 18

Binding wording
Binding schedule
Non schedule sections

Question 19

What are the 4 principles of lloyds which apply to delegated underwriting? Highlight each principle

Answer 19

1 - Profitability. Appropriate controls and reporting in place, aligns to main business plan
4 - Claims management - Clear reporting and appetite for delegating claims
5 - Customer outcome
11 - Regulatory & Financial crime. Training and annual crime report

Question 20

What is the system called which registers DUAs in Lloyds?

Answer 20

Delegated Contract Oversight Manager (DCOM)

Question 21

What is a bordereaux used for and what is the name of the system which needs to undertake this role?

Answer 21

Identify breaches of authority. DDM - Delegated Data Manager is used for london markets

Question 22

What is the name of the document used for DUA?

Answer 22

Certificate

Question 23

Who is responsible for organising audits in DUA and what are the some of the areas they might consider?

Answer 23

Leader. Underwriting, IT, Finance

Question 24

What is the difference between delegation and outsourcing?

Answer 24

Delegation = underwriting. Outsourcing = everything else

Question 25

What are the common rules for DUAs?

Answer 25

Consortium - Leader handles claims
Lineslip - Line leader
Binding authority - Coverholder or separate entity

Question 26

How does Lloyds and companies differ on claims handling for money

Answer 26

Lloyds - Centralised office to handle claims and movement of money
Companies - automated once parties agree on claims

Question 27

What is Lloyds rule on registering binding authority agreements?

Answer 27

All but restricted underwriting agreements must be registered