Cornel Schoeman, Chief Operating Officer of GENRIC Insurance
The Rise of Specialised Solutions and the Role of UMAs
The insurance industry is undergoing a transformation, shifting from broad, one-size-fits-all coverage models to niche solutions tailored to specific risks. This movement toward niche insurance is driven by emerging risks, evolving customer expectations, and advancements in technology. At the forefront of this change is the collaboration between Underwriting Management Agencies (UMAs) and traditional insurers in designing and delivering these specialised insurance solutions to a changing market and risk environment.
Most traditional broad-based insurance products are increasingly unable to address an evolving and disrupted market – think complex cyber risks specific to unique technology ecosystems, climate change and weather catastrophe, emerging liability challenges in artificial intelligence and machine learning, and highly specialized operational risks in sectors like renewable energy, biotechnology, and autonomous vehicles as just some examples.
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Several key drivers contributing to the growing need for specialised, niche insurance include:
- Increasing Complexity of Risks: traditional insurance models struggle to address the complexities of emerging risks such as cyber threats, climate change, supply chain disruptions, medical evacuation, gig work, blockchain and the like.
- Demand for Personalisation: Consumers and businesses alike are moving away from generic policies in favour of insurance products tailored to their specific needs that provide more transparent and value-driven insurance experiences. This is evidenced in the rise of usage-based insurance (UBI) and parametric insurance (which provides cover based on specific trigger events). Businesses and individuals alike are looking for covers that match their unique risk profiles and provide granular coverage tailored to their specific risk contexts.
- Advancements in Data and Technology: The availability of big data, AI, and predictive analytics has enabled insurers to assess risks more accurately and develop precise pricing and risk models. This allows niche insurers and UMAs to craft policies that cater to highly specific industries and risks, and to provide cover for what were seemingly uninsurable risks when such data analysis was lacking.
- Growth of Emerging Industries: New and evolving industries, such as renewable energy, gig economy platforms, medical cannabis, drone technology, and blockchain-based finance require insurance products that traditional insurers may not fully understand or underwrite. Specialised insurers and UMAs are stepping in to bridge this gap.
- Regulatory Changes and Compliance Needs: As regulatory landscapes evolve; businesses face more stringent compliance requirements as well as liabilities. Niche insurers are well-positioned to offer coverage that aligns with these regulatory and compliance demands.
The Role of UMAs and Traditional Insurers in Niche Insurance
Underwriting Management Agencies (UMAs) are increasingly important in the niche insurance space, acting as intermediaries between insurers, brokers and policyholders, providing specialised underwriting expertise and product development. And because UMAs are typically entrepreneurial businesses with very sector specific experience, they are more agile in developing niche insurance products to meet emerging market demands. This is particularly valuable in fast-changing sectors like cybersecurity, fintech, climate risk and healthcare.
Bringing these niche solutions to market requires the sector/industry specific experience that UMAs bring to the table, along with the backing of a like-minded insurer. Our key objective is to provide growth and structured processes and operational alignment that facilitate the success of our UMA business partners, while retaining the individuality, unique skills, innovation mindset and customer centricity needed. These UMAs are the backbone of a healthy, competitive insurance industry, and are typically more focused on development of specialised niche insurance solutions – for example gap cover, cyber insurance, medical evacuation cover, mechanical warranty insurance and so on.
Typically, these entrepreneurial UMAs are key in bringing much needed insurance product innovation and specialisation to meet changing market demands, but to break into the insurance market requires large capital investments to get established with the appropriate systems, processes and compliance requirements and the licenses to operate. GENRIC provides risk financing facilities to UMAs to participate in the insurance market, but with an alternative to the traditional and prohibitively costly 3rd party cell captive arrangements. It’s typically here in these cell captive arrangements where they run the risk of being usurped into the large corporate structures of potential funders – and rattled larger competitors – and lose the entrepreneurial drive that set them apart in the first place.
GENRIC has invested heavily in developing a business partner model that is fast and responsive, able to bring a specialist insurance product full circle from conceptualisation to live in the market within three months. The existence of UMAs – a relatively unique concept to South Africa – is premised on the fact that they are driven by people with highly specialist and expert skills who want to operate and grow their insurance businesses, without the distraction or red tape of large corporate environments and bureaucracy.
Our aim as GENRIC is to enhance both businesses through a partnership approach that establishes the necessary regulatory, compliance, capital and good governance controls necessary to differentiate in the market by focusing on niche and specialist insurance segments that meet the risk protection needs of rapidly evolving and highly diverse market.