Many reinsurers continue to use brokers to sell reinsurance to health maintenance organizations and stop-loss coverage to employers.
That can be a good way to sell HMO reinsurance or stop-loss coverage, but some reinsurers–the companies that are putting their capital on the line–may prefer to work with an intermediary that has a primary fiduciary responsibility to the reinsurer rather than to the client.
The typical managing underwriter is an independent contractor that has to cover its own operating expenses but works closely with a reinsurer and has an agreement that declares that its primary fiduciary responsibility is to serve the interests of the reinsurer.
Arrangements vary, but the typical managing underwriter also offers more services to the carrier than a typical broker might offer. Managing underwriter services could include everything from prospecting, selling and pricing to plan installation and plan servicing.
Here is a look at the factors that set a great managing underwriter apart from its competitors.
1. Underwriting skill.
Good managing underwriters should work closely with reinsurers to understand their underwriting philosophies and pricing guidelines, then work relatively independently within those guidelines. Some reinsurers review every risk submitted by a managing underwriter, while others give managing underwriters full binding authority and rely on audits and penalties to avoid unpleasant surprises.
2. Sensible compensation arrangements.
Most carriers try to align the goals of managing underwriters with their own by tying managing underwriter compensation to health plan performance. The simplest systems may give a managing underwriter a significant share of plan profits. When good managing underwriters are trying to use low prices to win business, they should compete on price by adjusting their own profit expectations rather than by trying to tinker with carrier loads or underwriting assumptions. In the long run, the odds are stacked against managing underwriters who try to tinker with underwriting assumptions.
A good managing underwriter should have a plan that clearly spells out its responsibilities, so that it can avoid duplicating the efforts of the reinsurer. But a typical managing underwriter also must find ways to remain “lean and mean” while providing a wide range of services for the reinsurer.
4. Terrific customer service.
A managing underwriter should be easy to do business with. It should, for example, be able to supply quotes within 10 days of receiving complete information about a prospective client. It also should be able to return all telephone calls within 48 business hours, and it should resolve all discrepancies in premium administration within 3 working days.
Mark Troutman is president of Summit Reinsurance Services Inc., Fort Wayne, Ind., a managing underwriter for GE Insurance Solutions and for Companion Life Insurance Company. He can be reached at firstname.lastname@example.org.
Their primary fiduciary responsibility is to the reinsurer