Fair presentation for MGAs important for Insurance Act

Ensuring clarity, especially around movement of policies from one insurer to another and the use of broker reporting mandates or letters of appointment, is an issue that could impact upon the Insurance Act.

Within the managing general agent space, we have seen some omitting of either claims information or details on the existence of any long-term agreements on a policy.

While this may be rare, it does raise questions about whether the exclusion of such important information means MGAs are being given a fair presentation, and even the integrity of the market. But what's fuelling this? Could it be competitive pressures as a consequence of the regulator's recommendation that insurance buyers shop around?

As underwriters, one of the fundamental questions is whether MGAs are being given a 'fair presentation' of the risk? This starts with the broker mandate and whether the policyholder actually knows what they are agreeing to.

Is this document - and this is a question for all intermediaries - clarifying that the policyholder is asking to obtain alternative quotes for their business? Or is it saying that the portfolio is being transferred to another intermediary?

Here again there is a challenge: is this just about the portfolio in question or the entire insurance requirements of the policyholder, and what about those policies where we have no expertise, such as pensions or investments?

Recently, the MGAA was seeking a specific class of insurance for the association from its broker. It confirmed that while it didn't have direct expertise in that area, it did work with another intermediary that could assist. This referral enabled the MGAA to proceed and obtain cover. In my view, that is not a weakness of the broker but a strength in identifying what it is and is not competent in.

Compliance with the Act and achieving fair presentation means we cannot pass our responsibility onto another; asking the existing insurer to divulge the sums insured and premium is not acceptable. To be able to produce a fair presentation it needs to be clear and that means looking at the risk and analysing what needs to be done to achieve the best outcome for the policyholder.

While the market has moved away from a back to basics approach, whereby it spelt out in a letter of appointment or a reporting mandate precisely what that meant, I am surprised that LTAs are still in use. However, if they are then such information is a must when disclosing the facts to a quoting insurer. Without it leads to a plethora of issues.

With expanding confidence around the UK's exit from the European Union and the opportunity for more UK clients looking to export, MGAs need to be transparent in what they can and cannot do. That way integrity will be maintained and our customers appropriately informed to make that important decision as to where to place their insurance requirements. And I am sure our own professional indemnity insurers will be pleased of that fact too.