What is an underwriting agency?

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An underwriting agency is a specialised type of insurance structure that has been granted underwriting authority by an insurer, according to the International Risk Management Institute (IRMA), and can administer programs and negotiate contracts for an insurer. An underwriting agency’s functions can include binding coverage, underwriting and pricing, settling claims, and appointing retail agents in a certain region, all of which are typically carried out by insurers. At its core, the underwriting agency manages all or part of the insurance business of an insurer and acts as an insurance agent or broker for the insurer, while working as the intermediary between insurers and agents, and/or insureds.

How underwriting agencies fit into the distribution channel

They act as an intermediary between a retail broker and an insurer, and work with insurers to attain specialised coverage for clients while having no contact with the insured. An underwriting agency operates on the insurer’s behalf while also working closely with clients to attend to their needs. What makes underwriting agencies unique is their binding authority from the insurer.

An underwriting agency will deliver and service a insurer’s product to both insurance brokers and clients. They can work with several insurers to formulate a specific mix of products to deliver to agents/brokers or directly to insureds.

How underwriting agencies benefit insurers and agents

Working with underwriting agencies is beneficial to insurers because they possess expertise that insurers may not have in their head or regional offices, and which can be costly to develop in-house, according to IRMA. Working with an underwriting agency, companies can pass time-consuming and complicated tasks to an outside entity that already has the knowledge to address them.

Underwriting agencies tend to deal in lines of coverage such as construction, public liability professional liability, where specialised expertise is needed to underwrite policies, though they can be active in any line of insurance, and work with all types of insurers. If an insurer wants to explore a specialty line of business, but does not want to take on the risks or uncertainty of doing so, they can turn to an underwriting agency to offer up that expertise, and give the underwriting agency the authority to underwrite and issue specialty policies because they are already familiar with the risks.