Setting up a match winner

Underwriting Management Agencies (UMAs) play a key role in the industry. Some of the cornerstones of a successful UMA include the choice of insurance partner with the alignment of goals and interests, a technology platform and the identified market.

Many companies start out as UMA’s and offer the public a unique, personalized service which can cater towards their specific needs. UMAs can be the best vehicle for a start-up insurance venture, and here are some pointers as to why any budding entrepreneur should consider the UMA type of structure.

Uncovering the major issues

There are huge impediments to a healthy entrepreneurial space in South Africa. The level of South African entrepreneurial activity will remain very low until we provide the following support structures and make the process of starting a new activity or entity attractive.

The list below is based on my personal opinion and is listed in no particular order.

- It is very difficult to get credibility and traction as a start-up business. South African businesses in general will often ignore your business until there is a business track record of at least three years.

- Overheads for South African start-ups are scary, and these overheads can vary from security to registering for tax, to name but a few. The red tape to do everything properly and to be totally compliant is a huge challenge. The barriers for a new entrant are so high that they could never independently set up the compliance structures without a lot of capital expenditure and capital requirements.

- In South Africa I meet new budding entrepreneurs nearly every day, but the channels and manner of trying to convert ideas into an entrepreneurial enterprise are just not there. The reality is that we have very few formal coaching structures. The quality of employees who can be recruited can be difficult to sift through in order to find those who will be valuable employees. A start-up is going to have to deal with trial and error in terms of this.

- One big difference that is evident compared to when I started out in 1994 is the level of integrity in the business space. I think comparatively, it was far easier in the 90’s compared to now. It is a controversial comment I know, but a big business can easily incorporate the requisite structures to smooth business.

These are just some of the major obstacles that an entrepreneur will need to surmount.

Converting this into the UMA space

Let us translate this into the UMA space. If the UMA start-up identifies the correct partner, most of the points above will be resolved immediately. For instance, the UMA partner will most likely have the track record, overheads, compliance and backing which can be carried as long as required off the license partner.

Most insurers have extremely competent managers and those assigned or responsible for the UMA partnership can nurture, guide and mentor the fledgling UMA. A UMA also normally starts with a handful of fired up entrepreneurs which solve the productivity issue. There are added advantages of UMA’s becoming part of larger insurance companies.

Insurer’s capabilities

One of the big issues in the industry is integrity. If the start-up can use the backing of the insurer, there is a far greater likelihood of being able to conduct business correctly rather than being vulnerable as a start-up. There is also a lot of consolidation in the industry whereby UMAs are merging with large insurers. Integrity is an important component of this. Costs are however an important challenge for UMA’s to manage.

In summary, if the UMA structure is correctly set up, it is a match winner. All you will need is a unique product offering, combined with the best suited partner, and the rest will be easy.