March 6th, 2012

Guy Carpenter’s 7th Annual Specialty Insurance Program Issuing Carrier Survey, Part IV, Operating Platform, Performance Management

Posted at 1:00 AM ET

Operating Platform

Carriers continue to maintain flexibility regarding their requirements for the services they expect their PA/MGA partners to perform and what they feel they need to control. Consistently, respondent carriers expect their PAs/MGAs to underwrite (93 percent), rate, quote, bind business (93 percent) and issue and service policies (86 percent). Most of the other services, even though not required or expected of PA/MGAs, are often performed by them, a third party, or in many cases, the carriers’ themselves.

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Performance Management

A carrier’s need for growth and profitability has to be closely monitored and controlled in the PA/MGA space. Every respondent in this year’s survey indicated that they had audit procedures in place to assure adherence to established risk selection and underwriting guidelines, financial billing, collection, remittance and banking guidelines, claim reporting, adjusting and settlement guidelines. Even though some changes have taken place in the number of audits conducted each year, this year’s results reflect the current and historical importance of the carriers’ PA/MGA management process.

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Program managers may also manage the performance of their programs through the pursuit of risk sharing on behalf of their PA/MGA partners. As we saw in past surveys, not all respondents require risk sharing. This year, the majority of those that require it utilize a sliding scale commission structure (86 percent) while the other 14 percent use some type of captive structure. Overall, however, 37 percent of the respondents still pay flat commissions.

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