ICS COVERHOLDER/BINDER AUDIT
If you have existing delegated authority binders are you comfortable that
- The coverholders have the capability to underwrite your risks?
- The operational efficiency of the coverholder is not putting you at risk?
- There are no omissions taking place which could leave your ultimate client without cover?
- Your coverholder is treating the ultimate customer fairly?
An independent, expert and confidential view could help you address these issues before you give too much authority to your broker thereby protecting your ultimate clients and yourselves.
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The ICS Binding Authority Auditing Service gives you feedback on how your authority is or could be used to ensure the coverholders regulations are being abided by enabling you to maximise and prioritize your underwriters time and focus
What we offer:
- In depth discussions with key members of staff with responsibility for running the schemes
- Checking how the procedures actually operate
- An agreed sample of files will be reviewed
- A comprehensive report reflecting how your authority is being handled
- An impartial view on how the coverholder is resourced and how binder regulations are being fulfilled.
- An action centred report which allows your underwriter to prioritize their most important activities
Benefits to Managing Agents/Underwriters
- Knowing you are in control of your binders from a totally impartial perspective
- Allowing your underwriters to focus on writing and retaining business
- Enabling your underwriters to build rapport with their brokers
- Giving your underwriters time to focus on the most troublesome binders
- Ensure your underwriters do not have to travel the UK for no positive purpose
- Allowing your underwriters to focus on the profitability of each scheme
Ensuring FSA compliance
Are the coverholders conflicts of interest managed?
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Is contract certainty in operation?
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Are there adequate systems in force to mitigate the potential risks?
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Is the coverholder observing all of the FSA’s 11 Principles for Business?
For more information, contact Neil Williams or any of the ICS Team on 01892 539600
An article by Neil Williams of ICS on the importanc eof Coverholder Audits.
Coverholders and Delegated Binders need to be protected whatever the state of the market.
In a previous life I was brought in as a MD of a brokerage which was in total disarray owing to the delegated authority being removed from the broker from both a claims and underwriting perspective. This had a major impact on the overall running of the business for the following 3 years.
How this situation occurred I will never really know as I was not there but the ramifications on the business, my managers and me were dramatic. Renewals had been missed and therefore on occasions we were only made aware two years later at the time of a claim. Incorrect product information had been sent out following the acquisition of the business or terms had not been made clear which made claims handling extremely difficult. Many times the cases had probably been dealt with in the right way but there was no evidence to back this up so you were literally always on the back foot.
When I subsequently joined a specialist in compliance services where the Associates are steeped in insurance good practice and knowledge and are used to seeing “the good, the bad and the ugly” of insurance broking I knew we had the basis of a Binder (Coverholders) Audit service. When we then were given an excellent underwriting document from a friend whose expertise is unsurpassed and then added the intricate compliance aspects, I knew we were ready to role.
It is the underwriter’s role to put the binder together, build the account and relations with the broker and it is dangerous for the same individual to be responsible for auditing the account. Naturally when companies are of a size where they have sizeable departments focusing on all aspects underwriting, compliance and claims they may well have this taped. It seems that some Underwriters fulfil their responsibilities really well and others never seem to get around to it.
In the circumstance where an underwriter may not get around to it or only looks at the technical aspects whose responsibility is this going forward, the underwriter or the broker?. In most circumstances one would think the underwriter but when something goes really wrong “who is left holding the baby” as far as a claim that is not covered or if the underwriter from head office is unhappy with the overall running of the facility and takes the authority away.
It has been pleasing to see even where there are adequate resources some companies prefer to have independent auditors in every other year to gain a detached view owing to the fact that too many assumptions can be made when anybody gets too close to something.
It is normally when the market hardens that the underwriter looks more closely at delegated authorities and any removal of such is a disaster to the broker as this is exactly the time when you can maximise the arrangements. Once you have found an underwriter that will write your niche business it normally takes a minimum of 6 months setting up such arrangements adequately.
Whether you are an underwriter or a broker it is essential to keep a close eye on your binding arrangements from a business perspective and it looks like “the headlights of the FSA are shining brighter in this area”
Are you comfortable that your facilities are in good order and that you will still have them when the next hard market comes around?Neil Williams