Many if not most MGAs function under a delegated authority model, where they are authorized for binding and other carrier responsibilities. This can be a marvelous use of a carriers precious insurance capacity because they can outsource underwriting and portfolio responsibilities to an MGA instead of building it internally. It works especially well when the MGA has financial prospects that provide diversification and/or a better return for that capacity than the insurer could have achieved on its own. There are sources of capacity that ONLY use this model (no internal desk underwriting). It is akin to a portfolio manager selecting specialized outside funds to allocate their capital towards and making no other specific investment decisions. Thus the term delegated authority (or as you may often see, “DA”).
While great in theory, in practice, things can go awry. Somehow, the carrier must make sure that the entities under DA are following their contractual guidelines and meeting agreed upon expectations. In practice, whether intentional or not, delegated authorities exceed their authority. They may write business they were not supposed to write, or they may have accumulated too much aggregation in capped geographies, or misprized, or a whole range of other violations of the authority. It is therefore critical for carriers to have a finger-on-the-pulse to whether they’re DA’s are abiding by the authority agreement or not. In the past, this was often done using in-person audits. In the digital age, those still exists, but we are transitioning to a more digital realm where the spreadsheets rule. This has not helped carriers, but just created a different set of work as spreadsheet data needs to be scrubbed and validated. Unfortunately, the spreadsheets have given us a sense of comfort that we are having control over the problem, when in fact, we probably have made the problem worse and the work flow as ineffective as before (and maybe less so)
Enter Distribind…
In this episode of Profiles in Risk, Tony chats with Dave Connors, Co-Founder and CEO at DistriBind. They are curing the insurance industry of our spreadsheet addiction, a data exchange platform with a special focus on delegated authority. They provide a lot of validation, data cleansing, and most importantly validation to provide a lot of much-needed certainty.
Dave Connors: https://www.linkedin.com/in/daveconno…
DistriBind: https://www.distribind.io/
About Nicholas Lamparelli
Nick Lamparelli is a 20+ year veteran of the insurance wars. He has a unique vantage point on the insurance industry. From selling home & auto insurance, helping companies with commercial insurance, to being an underwriter with an excess & surplus lines wholesaler to catastrophe modeling Nick has wide experience in the industry. Over past 10 years, Nick has been focused on the insurance analytics of natural catastrophes and big data. Nick serves as our Chief Evangelist.
Nick Lamparelli is a 20+ year veteran of the insurance wars. He has a unique vantage point on the insurance industry. From selling home & auto insurance, helping companies with commercial insurance, to being an underwriter with an excess & surplus lines wholesaler to catastrophe modeling Nick has wide experience in the industry. Over past 10 years, Nick has been focused on the insurance analytics of natural catastrophes and big data. Nick serves as our Chief Evangelist.
