UMAs can navigate changing landscapes
Before I entered the industry, many of the first underwriting management agencies (UMA) exploited the benefits of a UMA structure brilliantly. The benefits are unequivocally capital levels, compliance requirements, and other no lesser support functions like relationships with the likes of the Ombud, says Chris Barry, Managing Director of HCV.
Furthermore, a lot of the first UMAs were genuinely breaking moulds with product or business practices that were uncommon in some areas. Equally difficult and generally speaking they were testing new markets or environments. My point being that when these UMAs got it right, they often did it spectacularly in every sense of the word.
Sticking to the basics
Some of these original businesses remain that successful, purely because they have stuck to that principle or entrepreneurial advantage which has served them so well. I am referring to areas where proper niche markets were exploited.
There could be very many reasons why the platform has changed for prospective UMAs, but there is no doubt in my mind that the environment is now quite simply different.
The major challenges for UMAs or for anybody anticipating starting a new UMA, are the following:
• The quality of your insurance partner is critical. If there is no alignment between the UMA and the license partner, it will be a recipe for disaster. What I am suggesting is that the UMA has to have a very clear understanding how that UMA will fit or not fit into the greater insurance license carrier or partner.
• Original UMA models were extremely clever at the business being capitalised without any capital investment. So many start-up businesses struggle with the up-front costs. The expectation of any market is now that your business will be up there with technology. There is no opportunity to get away with light systems. Brokers and clients are consistently used to the best, and will not entertain anything less. My point is that historically, it could be possible to avoid big capital start up costs but now this is nearly impossible. Again, if there is a relatively cheap platform that can be rented from the partner or license carrier, this could be the critical issue which makes or breaks the UMA.
Getting to the heart of the issue
While the above challenges are significant considerations for UMAs, they are not the biggest challenges that they will face.
The biggest game changer at the moment is the market. The first successful players had a ‘window of opportunity’. There was enough time to get traction, cement a reputation in the market and become a ‘brand for the right reasons’. Once the brand was established, the UMA quite rightly exploited the position and became a huge success.
The problem is that some UMAs are considered to be either specialist UMAs or commodity UMAs. The former is exclusive, the latter is more a matter of ‘anybody can do it, and they will’.
The situation with commercial vehicles
Heavy commercial vehicles are considered, in my opinion, to be commodities with the resultant ‘anybody will try it’ attitude of underwriters. Others have been extremely successful at upholding specialist skills. In the commodity space, any market change or product change will probably be copied before you have even released it to your own clientele. So one’s capacity for fresh product and innovation is almost impossible to sustain with a UMA competing against the big brands.
The reality is that UMAs of the future will have to be extremely well planned with all the above points very well defined and accounted for.
The market has however some fantastic challenges. Apart from some potential private rail initiatives, road transport will continue to grow and these will present opportunities to the truly professional Underwriters including UMAs.
