Forward thinking

Underwriting management agencies (UMAs) play an important role in the financial services industry as they provide cover that larger insurers may not offer. Further, they have key skills to manage unique risks.Despite their importance to the financial services ecosystem, UMAs face an uncertain future as the financial services industry undergoes massive changes. This was some of the topics under discussion at the recently held South African Underwriting Managers Association (SAUMA) Conference.

Massive groundwork needed

SAUMA Chairperson and Director at Leppard & Associates, Steve von Roretz pointed out that a lot of work needs to be done to preserve the integrity, and the future, of the UMA.

“Regulatory reform is one of the biggest challenges that the financial services industry is currently facing. However, regulation continues to fail to be fit for purpose when it comes to the UMA space. UMAs are continuously being confused with the broker or with a binder/outsourced agreement. When it comes to regulation, the role of the UMA is blurred,” said Von Roretz. 

Predicable impact

Along with regulatory changes, technology is one of the biggest challenges that the financial services industry needs to currently deal with. 

“Technology, especially artificial intelligence (AI) will utterly change the status quo within the industry. It will drive product development and will determine the costs associated with current market channels. Further, there are some fears that AI may fill the role of some UMAs which would ultimately make them redundant,” said Von Roretz. 

There is also a problem when it comes to client engagement. The value of UMAs are that they can help manage risks on a specialised level. With AI, it can become very difficult for a client to know who they are engaging with. As Von Roretz pointed out, the lines become very blurred, if there are any lines at all in some cases. 

2030 and beyond

There is an obvious need to reposition UMAs within the context of a changing industry. What elements will the UMA of the future need to have in order to remain relevant? 

Paul Carragher, MD of Compass Insurance, pointed out that one of the critical elements of this repositioning is collaboration. 

“The UMA of the future needs to take an exponential approach to the business they write. This means that the skills they offer need to grow in line with the risks their clients face. This can be achieved if a UMA is tech savvy. If we look at the world today, every company is tech enabled because they realise that they exist within a different world. With this changing world, there are new risks to manage, new products that need to be offered and new ways to navigate risk,” said Carragher. 

Ever present

Carragher presented a different view when it comes to the challenge of AI making certain jobs obsolete. 

“Machines and technology may define the world that we live in, but they don’t create the world that we live in. There may be some instances where certain jobs are taken over by machines, but people and human interaction will become more important. People skills and empathy cannot be given to machines. When it comes to complex risks, clients will always want to consult with a human,” said Carragher. 

According to Carragher, the real challenge when it comes to technology is keeping up with the changes and embracing them. 

“UMAs should be curious and unafraid to explore the world around them. They should not be scared. Jobs will be different, and day-to-day tasks may be taken over by AI; but that leaves human skills to focus on other aspects of the business. Engagements and relationships are at the heart of the UMA business model, they will become more important in the future,” said Carragher. 

Finding a place in this world

The world is currently on its fourth Industrial Revolution and as with every Industrial Revolution that preceded it, there will be changes to the world as we know it. If UMAs want to survive in this new world, they need to redefine and reposition themselves so that they can appropriately address the risks that their clients face. 

This is not something that is unachievable. UMAs have been doing it for years. The secret is making this change and adapting without fear. 

Editor’s Thoughts:
What are some of the unique challenges that you face as a UMA that is currently changing the shape of the financial services industry? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.