"Although not traditionally classed as self-insurance, program business involves an intermediary assuming many of the roles of an insurance company. This is achieved through a delegated authority from an established insurance company which allows the intermediary to market and sell policies under its own brand without referring them to the insurer."
When correctly constructed, program business represents a harmonious relationship between an insurer and an insurance intermediary (normally referred to a managing general underwriter or managing general agency). The insurer is able to agree rates and policy forms and obtain business without the expense of having to market its own products to customers whereas the managing general underwriter can create a one-stop shop for its customers, often creating customer loyalty through a process known as white-labelling where the managing general underwriter is perceived to be the insurer.
Since the authority to accept and bind risks is being delegated to the intermediary who will normally also be responsible for collecting premiums, a degree of due diligence is required as well as scrutiny and confidence that the responsible party will act in a compliant and honest manner. The managing underwriter assumes many of the responsibilities of an underwriter and skills are required to ensure that the managing underwriter acts in a professional manner taking into account legal and compliance considerations and ensuring that complaints are kept to a minimum.
By assuming the role of an insurance company by issuing policies to customers or intermediaries, the program manager assumes a duty of care to the insurer to ensure that the business is properly managed and controlled.
In many ways, establishing a delegated arrangement for the first time should be viewed in the same way as starting a new business.
As an agent of the insurance company, the program manager has an obligation to ensure that the required performance targets are achieved as agreed with the insurance partner.