TR15/7: Delegated authority: Outsourcing in the general insurance market

This report sets out the findings from our thematic review that looked at delegated authority arrangements in the general insurance market. The review focused on concerns over firms’ oversight of outsourced arrangements and the potential impacts any shortcomings could have upon the delivery of products and related services to customers.

Why did we carry out this thematic review?

Delegated authority is widely used in the UK general insurance market. This can include outsourcing of underwriting and claims handling to third parties and the allocation of other functions such as product design.

We wanted to understand how firms approached outsourcing across the general insurance marketplace (including the activities and functions being outsourced) and how responsibilities flowing from such arrangements were managed. 

More importantly we wanted to understand how these arrangements impacted on customer outcomes.

TR15/7: Delegated authority: Outsourcing in the general insurance market [PDF]

Who should read this?

This report is aimed at insurers delegating authority to third parties as well as firms participating in such arrangements, which include insurance intermediaries and third party administrators.

What was the scope of the review?

We reviewed the outsourcing arrangements of 12 insurers representing a broad range of firms operating in the UK general insurance market. We also reviewed the activities of 19 firms that held underwriting and/or claims handling authority from those insurers.

What did we find?

Our findings included: 

  • Insurers do not always treat delegated arrangements as outsourcing and improvements are needed to due diligence and the way they manage such arrangements.
  • In many cases, insufficient focus and consideration has been given to how the interests of customers might be impacted by outsourcing.
  • Some intermediaries undertaking product design activities do not recognise the extent of their responsibilities as product providers.
  • In many cases, there is insufficient oversight of the performance of products and delivery of services.

What are the next steps?

We will continue to engage with industry to address the issues identified in the review and intend to provide individual feedback to firms included in our work, setting out any actions required as a result of our findings.

Our ongoing supervisory work with regulated insurers and intermediaries will focus on the questions and issues highlighted in this report to verify that firms have reviewed their activities in the context of these findings and have taken steps to address any issues identified.

More information

TR15/6 – Handling of insurance claims for Small and Medium-sized Enterprises (SMEs)

TR14/18 – Thematic review of complaint handling

TR14/8 – Insurers’ management of claims – household and retail travel

TR14/9 – Commercial insurance intermediaries – conflicts of interest and intermediary remuneration