Best’s Special Report: Industry Survey Signals Sustained Growth Potential for Delegated Underwriting Authority Enterprise Segment

Nearly three out of four respondents to a recent industry survey on the Delegated Underwriting Authority Enterprise (DUAE) segment believe this market sector is on a path of sustained growth, according to a new AM Best report.

The optimism around this potential is tied to carriers’ growing reliance on DUAEs to access niche markets, the expanding lines of business being managed by DUAEs, and rising trust in this model due to the segment’s success over the past several years, according to survey results.

AM Best conducted a market-wide survey of its rated carriers last August to assess the strengths, challenges and evolving expectations of the DUAE segment. AM Best defines a DUAE as a third-party entity that is contractually appointed by an insurer or reinsurer to perform underwriting, claims handling, or other administrative functions on behalf of their carrier partners.

“Our survey results paint a picture of a segment that is highly valued for its specialization, agility, and adoption of technology,” said Dawn Walker, associate director, AM Best.

The report also strikes a cautionary note, referencing the pressure evident from the challenges in understanding and maintaining regulatory compliance, financial stability and accountability. The survey results indicate that the majority of insurers view maintaining and cultivating current DUAE relationships as more critical than developing new ones to optimize their growth plans.

Chief among the survey’s other findings:

• Nearly half of the carriers surveyed value the specialization and flexibility of the non-affiliated DUAE model over a more direct relationship or a combination of both;
• Nearly 75% of respondents cite this segment’s access to niche business as a top reason to use this channel;
• The property/casualty segment dominates the industry’s use of DUAEs with personal property as a focal point.

Technology has also become a cornerstone of DUAE operations with many having roots as technology providers. These entities may more easily deploy capacity and rapidly respond to market changes, as they are not burdened by the legacy systems that many insurers grapple with. “The growing adoption of data-driven underwriting and predictive analytics gives DUAEs a competitive advantage,” said David Blades, associate director, AM Best.

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=350962.

To learn more on how AM Best evaluates DUAEs through its published methodology on Best’s Performance Assessments, please click here.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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