You may have come across the term ‘delegated authority’ in your dealings with insurers and intermediaries, but what does it mean and why could it matter for you?
In its broadest sense, delegated authority is when a primary insurer – for example, names like AXA XL, Covea, NIG and Zurich – give an intermediary broker the authority to underwrite a policy and process claims on their behalf.
In other words, the broker decides if the risk is acceptable and on what terms (premium, excesses, exclusions etc.), and agrees cover with the client. The primary insurer isn’t directly involved but is bound to honour its policy obligations in the event of a claim.
So, naturally insurers are only going to give delegated authority to brokers they can trust, and who have a good track record of getting things right. “Giving the pen” as it is often called, is a sign of the trust insurers place in a particular broker’s skill, expertise and client servicing.
Policies offered by specialist brokers are likely to include special features that they have negotiated with insurers that are tailored to their market.
At Deacon we have arranged policy packages, exclusive to us, that include cover such as trace and access costs1 that might be charged as extras elsewhere.
We aim to have policies that cover all the core requirements for blocks of flats and can negotiate extra cover as required. We are not tied to insurers who give us delegated authority, and with the global power of Gallagher behind us, we can go to the open market as and when necessary.
Delegated authority tends to be given to specialist brokers with detailed knowledge of their customers’ risks and requirement.
A broker with delegated authority might for instance be offering policies for members of a specific sports association who all have similar needs or, as we do at Deacon, for buildings and related insurance specifically for flats.
Thus, if you live in a flat, the buildings-related insurances included in your service charges will likely be provided by a broker with delegated authority while the contents cover you provide for yourself probably will not.
Choosing the right broker for you
Of course, not all brokers with delegated authority are the same. The main difference between them, apart from the market they specialise in, is the level at which they are authorised to act autonomously.
At Deacon, that level is set high. For underwriting and setting up or renewing a policy, Deacon can underwrite and issue the vast majority of the policies we arrange. We currently insure several blocks with a rebuild value in excess of £50,000,000 under our delegated authority.
Where we need to refer to the insurers before issuing policy documents, for very unusual buildings, or where there is a claims history that may call for further investigation into how the building is being managed, you probably won’t even notice what we are doing on your behalf.
We usually identify issues and resolve them with the insurer before we provide you with a quote. Whether we underwrite directly or need to refer to the insurers, we do all of the administration for you.
Where it really counts – claims!
The level of claims authority is also important, and the first thing you will notice if you need to call on your insurance policy is how quickly our highly experienced in-house claims team can act. In 2019 they handled over 3,500 claims.
We have the authority to handle claims from start to finish. That includes appointing a trusted loss adjuster. At up to £100,000, the limit on the value of claims we can handle and pay without any reference to insurers is high by our own market standards.
The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited trading as Deacon accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.