Types of UMA business models

When entering into a UMA agreement with an insurer, UMAs typically have two business models to choose from. One business model is that the UMA can underwrite business purely for a pre-

negotiated underwriting fee. The other business model is that the UMA can participate in the performance of the business they underwrite via a cell captive or other type of profit share model.

Depending on the type of UMA and its appointment, the UMA will usually perform more than one binder activity on behalf of the insurer. In fact, in most instances, the UMA’s activities include:

• The sourcing of business via its own independent intermediary distribution channels;
• The placement of business;
• Pricing;
• Risk selection and endorsing of the business;
• Negotiating commissions;
• The complete handling of claims;
• The issuing of policies and endorsements; and
• Collecting policy premiums.

Naturally, the insurer also requires the UMA to report on and account for all the activities above. It is important to note that a UMA does not deal directly with the public or end-consumer and that all the UMA’s business is sourced via the independent intermediary.

UMAs in the making

UMAs are typically owned and run by business individuals and entrepreneurs who are experienced in the insurance industry, including the specific lines of business they underwrite.

Generally, a UMA will be formed after spotting a gap for a niche or specialist product in the insurance industry.

UMAs have contributed greatly to the growth and product innovation in the insurance market place. UMAs are often known for the niche, specialist skills and abilities they have and the superior service they provide, although one does not have to offer a niche product to become a UMA.

Advantages of partnering with a UMA

For insurers and brokers, there are many advantages that arise from partnering with a UMA. These include:

• UMAs offer insurers access to specialist skills – this means that the insurer does not have to invest substantially in new people and infrastructure;
• A UMA’s strategic benefit most definitely lies in its knowledge and expertise and brokers often rely on these differentiators as a safety net for their clients and their policyholders
• The UMA’s focus and agility usually allows for excellent service provision and dedication to meeting the target market’s needs;

Sometimes, the only reason why insurers have capacity in certain lines of business, is because they have a specialist UMA underwriter that is responsible for that specific business segment; and

• Compared to the insurer, the UMA, given its flexibility and efficiency, is often ideally positioned to provide the customer with custom-made products in a less complicated and more efficient manner.They will also want to know how the UMA handles claims and other administrative functions. An existing UMA’s reputation in the market will also be on the agenda.The UMA business model is built on service excellence, product innovation, high skills levels and much needed expertise, especially in the technical, niche or specialised lines of business.
• This makes the UMA a good fit for the hungry, competitive and ever-evolving insurance market. The attributes mentioned above ae important contributors as they play an integral role in shaping the future of South Africa’s insurance sector and overall economy.
• Ideal carrier for insurer growth
• When looking to deal with a UMA, one would typically enquire about the UMA’s outlook on relationships in the insurance industry. Insurers, for example, would want to gain insight into the kind of relationship that the UMA has with its brokers. Other aspects that insurers would be interested in are the UMA’s industry’s knowledge and expertise especially with regards to the market segment they underwrite.

 

By Subashini Kallan, client manager at Centriq Insurance