Drown out the noise and don’t let regulations kill creativity
New opportunities and challenges exist in today’s insurance environment where products are now being created by increasing numbers of entities. How does a UMA gain a competitive edge?
Because playing fields have been levelled to some extent by the regulator, there are fears – specifically in the underwriting managers agencies (UMA) space – that the broker with the binder, also the direct insurer, is invading their territory because given that they can now all underwrite risk, develop their own products and settle claims.
Play by the rules
Through binder regulations, the UMA’s world is controlled and governed by the Short-Term Insurance Act. A UMA may bind an insurer extensively including cancelling policies and rejecting claims on the Insurer’s behalf. They may also earn a share of the profits from the scheme they underwrite on behalf of the insurer.
In fact, UMA’s act as an absolute agent of the insurer, although they are still referred to in our law as an intermediary, given that they are a separate legal entity. It almost allows the UMA the same freedoms and mandates as the insurer, but with certain limitations such as speaking directly with clients and not being associated with brokers giving them business.
Developing a niche
It allows entrepreneurs to develop specialist niche products not normally available from insurers or brokers. Considering the definition of insurance, there are many areas remaining outside what insurers commonly cover that leaves opportunities in the market. There’s room for innovation and unconventional cover, but at the same time allows for entrepreneurs not to be forced to be part of a corporate with all that entails.
A UMA can effectively act as a mini insurance company without the headache of managing a license and still earn the profits. It can be seen for some as the best of both worlds even where the UMA is a company dealing with the more standard insurance products. The competition might be strong, but if they can differentiate on product and service, you will still be a strong choice for the broker.
A flourishing market
There are many UMAs still flourishing today, even in a world where brokers can also bind insurers and where insurers are increasingly dealing directly with clients and expanding their product range.
Unconventional products as well as highly specialist products can be best dealt with by the UMA who has a specialist claims and underwriting team; the conventional insurance engine room may not be able to assist in this because of the specialist nature of the product.
It is true that UMAs need to be aware that the broker with the binder, and the insurer, remain their competition. Regulation has changed their world in some ways by forcing them to sell only to brokers and stand out with their own value proposition. However, all clients are searching for the differentiator of service and product and the UMA certainly ticks both those boxes.
The unconventional areas
Who would have thought that pet insurance, taxi insurance, expensive art insurance, bicycle insurance or legal insurance would have become such popular products among consumers and provide them with protection which is now considered by many to be essential. In today’s fast moving world of insurance, one cannot simply be an affable person but one has to search for innovation, and there is no better vehicle than the UMA to launch this into the market.
We all need to be mindful of the regulations that are there to make sure consumers are properly protected; but such regulations should not stifle business. They need to be embraced and used to create a win-win situation.
