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In challenges lies opportunity

01 August 2013 Cornel Schoeman, GENRIC

Being an independent underwriting management agency (UMA) in the short-term insurance market has an abundance of challenges, but the upside of being fleet-footed is a huge advantage, and not one to be underestimated.

Independent operators in the short-term insurance market are beset by challenges, as opposed to being in the more comfortable folds of larger insurance companies and their distribution channels.

Independent challenges

One of the challenges for an independent starting out is to establish a large distribution channel. A start-up independent underwriting management agency (UMA) has to build its own broker base as opposed to tapping into a large corporate structure where this already exists says Lesley Kruger, sales manager at UMA Quantum Liability Underwriters.

"To successfully take your product to market, you have to have a productive broker network,” Kruger says. She is the chief architect of a new professional indemnity policy aimed at motor dealers and short-term insurance intermediaries, launched in May by Quantum, and underwritten by GENRIC Insurance.

When you are small and independent, having a broker network can be a major challenge. However, there is a way around this obstacle, Kruger argues. Smaller, niche insurers specialise in backing independent UMA’s who offer single line products. One such insurer is GENRIC, which can offer an existing sales and distribution channel to independent administrators and underwriters.

Opportunity in adversity

"Being a niche UMA is a model we understand very well, since we’re the mirror image of that. We work only with people who specialise and don’t generalise,” says GENRIC’s commercial executive, Cornel Schoeman, "the independent knows his product and clients intimately. He is small, quick and flexible in making decisions, like we are.” Indeed, in the challenge also lies the opportunity.

Kruger at Quantum agrees. "As an independent you’re flexible and agile,” she says. "You can be innovative in your product designs and be open to opportunity.”

Under the CPA, consumers have access to free legal assistance when they file complaints and claims, whereas motor dealers are left vulnerable with precious little support to fall back on.

"There was a clear need for a product like this,” says Lylanie Mackenzie, legal officer at Quantum. As a result, GENRIC has crafted and pioneered, in the space of one-and-a-half years, a one-of-a-kind cover through Quantum.

Help with running a business

However, independents have other challenges. In a smaller business, the independent also has to attend to indirect aspects of the business, like accounting and administration, human resources and contractual matters that could be a distraction from focusing on the core business of underwriting risks, Schoeman says.

"As an independent you have to be all encompassing,” he explains. "You have to be the accountant, the HR department, the legal department, all in one, which can cause such distraction at times that you have to take your eye off the main reason for your business to exist in the first place. This is a very real and big challenge for an independent.”

However, there are solutions to this as well, he argues. Niche insurance companies, like GENRIC, provides assistance to the independent UMA when it comes to administrative functions of running a business.

"For this reason, and the fact that we are open to new, innovative partnerships, for any independent looking for a house, they [independent operators] don’t need to be left out in the cold,” Schoeman says.

He argues that a niche product would find it difficult to get support from a large insurance company, which would first look at its bottom line, and give little assistance in terms of knowledge. And that is why smaller, niche insurance companies exist.

"The independent has challenges, yes, but these are not insurmountable. In fact, it can be used as a huge advantage,” he adds.

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