By Mark Stroop
New Coverholders will experience an application approval process required to enter into contracts of insurance under what is known as a “registered binding authority.” Certain sections of the Coverholder application are completed by 1) the applicant, 2) the applicant’s sponsor, and 3) the Lloyd’s managing agent who is intending to delegate its authority to the applicant under the binding authority. The managing agent can also serve as the sponsor.
The final details of the Coverholder’s authority and responsibility to perform is outlined in the binding authority agreement. Once approved and signed by all parties, the Coverholder may enter into contracts of insurance and issue the pertinent insurance documents as proof that contracts of insurance have been accepted. There are many sections of the new Coverholder application that span a broad range of topics, including the all-important section of “Systems and Controls.”
The importance of the “Systems and Controls” in place to facilitate and monitor the following areas of business operation should not be understated. Key areas of impact include:
• The Scope of Authority- outlines the authorized and unauthorized classes of business and coverages; territorial limitations, financial information (premiums, deductibles, maximum limits, etc.)
• Documentation for Insurance Bound- includes application and proposal forms and contract documentation forms.
• Claims and Complaints- procedures for the handling and settlement of claims and pursuit of recoveries, in addition to complaints or proceedings.
• Reporting, Records, and Aggregate Exposures- including Risks Written Bordereau/ Reporting and Aggregate Exposures, Accounting Bordereau/Reporting and Settlements and Records, Statistical Information and Audit/Inspection Information.
An effective production and management system at the Coverholder should essentially be “custom tailored” to ensure the proper controls are in place for compliance. For example:
• During the marketing and sales experience the system will help maintain that submissions are complete and in compliance from an underwriting and rating perspective before they are bound.
• One a policy is bound, data should seamlessly flow from the underwriting/rating component to the documentation section where business rules are automatically invoked to ensure the proper contract documentation is assimilated and produced. The same concept applies down the line for endorsements, cancellations, reinstatements and the renewal cycle.
• Whether claims are handled in-house by the Coverholder or outsourced to a TPA (Third Party Administrator) it is critical the claims process is administered, recorded and reported in compliance with the terms of the agreement.
• Reporting, Records, and Aggregate Exposures are really the “pulse” of the business relationship. Accurate data needs to be accessible in a timely fashion so stakeholders can monitor performance and adjust in a timely fashion when needed.
Coverholders, Brokers, Syndicates and Managing Agents need to continually measure their performance to meet expectations and to ensure compliance to the binding authority agreement. The most effective Coverholder systems maintain this status on the fly, i.e. the policy is not issued unless all conditions have been met to satisfy the binding authority requirements. Data to support business reporting and audits is automatically accumulated and aggregated in real time during the natural course of businessnot assimilated later from nonintegrated or manual systems.
NetRate Systems, Inc. solutions include cloud-based portal, high performance submission, underwriting, rating, easy quote and policy document generation, data analytics and integration with 3rd parties for the Property and Casualty insurance marketplace, primarily in the MGA, Program Administrator, Coverholder and small/medium carrier environment. NetRate products include nationwide rating of ISO® General Liability, Property, Business Auto, Crime, Inland Marine, BOP, as well as NCCI Workers Comp. NetRate also offers custom programming of all lines of business, including Professional Liability. For more information, go to www.netrate.com.
About the author:
Mark Stroop, Sales Executive at NetRate has helped MGA’s, carriers and agencies with technology solutions that streamline the process of generating new and renewal business for 20+ years.
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