Managing agent procedures
Every managing agent that writes, or permits third parties to write, master/group policies should have relevant procedures in place in relation to the writing, management and oversight of master/group policies. Procedures should be proportionate to the business written while ensuring that the minimum expectations set out in the Procedural Requirements are covered.
Conduct risk assessments and product reviews may be undertaken at product level. This may form part of your usual annual product review process. Where a product is permitted to be distributed via master/group policies this distribution method should be considered as part of the conduct risk assessment and the customer risk should be assessed taking into account the types of potential Customers that will be provided with coverage under a master/group policy (commonly called the beneficiaries). Master/group policies should be not be written where the product has not been approved for distribution via such arrangements.
Master/group policy procedures should address how proposed master/group policies will be checked to ensure they comply with the Policy Level Requirements and the agreed parameters of the relevant product. This should be proportionate to the volume of business written. For example, a checklist could be utilised that underwriters complete. Alternatively, the managing agents’ procedures might require that master/group policies are referred to the DA or compliance team, or to POG for review.
The process should also be proportionate taking into account any other controls in place. For example, if a specific wording has been approved by POG as part of a product review for master/group policy use which addresses key aspects of the Policy Level Requirements then it may not be necessary to re-review compliance with these Requirements every time the wording is utilised in the specified territory. For example the POG approval process could ensure that the wording:
- has been assessed as suitable for use in the particular territory
- does not permit the master/group policyholder to receive any remuneration
- excludes the use of shared aggregates
- does not permit the master/group policyholder to have complaints authority
- does not permit the master/group policyholder to have claims authority
- requires the provision of a prescribed template setting out evidence of cover to all Customers
In this scenario it could be assumed that the relevant Policy Level Requirements are met whenever the approved wording is used. However, if amendments to the wording or a bespoke wording are proposed, and depending on the significance of the changes, a referral for further review may be required.
The important thing is that procedures are in place to ensure all master/group policies comply with the Policy Level Requirements and that compliance is suitably documented.
Appropriate due diligence should be conducted and recorded to determine that the master/group policyholder and any other administrator are capable of performing their responsibilities under the contract. Again, this should be proportionate to the business written. The most important aspect of the due diligence is likely to be ensuring the master/group policyholder is capable of supplying the required data. However, it will also be important to consider, where relevant under the contract, the master/group policyholder or administrators’ ability to track, collect and remit premium, to share evidence of cover with the beneficiaries and to comply with expectations regarding the timely referral of claims and complaints. It should be clear who is responsible for carrying out this due diligence and how it should be recorded. It might for example form part of a master/group policy checklist.
Managing agents should have in place an appropriate internal sign off process for master/group policies. This should be proportionate to the business written. As discussed above, general approval for a product to be distributed via a master/group policy should form part of the product level approval. Sign off at policy level is likely to depend on the procedures in place for the review of individual policies. Underwriters may be authorised to sign off their own master/group policies without internal referral where they are responsible for the review. Where this is the case we would recommend that sample checking is in place.
Master/group policies should be subject to regular review to ensure they continue to comply with the Policy Level Requirements. They should also be reviewed more broadly from a customer outcomes perspective. This is likely to be covered by the product and policy review processes discussed above which we would generally expect to be annual. In addition where multiple master/group policies are written for the same product it is likely to be beneficial to compare performance across the policies to ensure all groups are receiving value. This may form part of the broader product review.
Lloyd’s does not expect master/group policies to be subject to the same level of scrutiny where they are written on a follow basis. However, a proportionate approach should be taken. In particular, reasonable steps should be taken to satisfy yourself that it is a genuine master/group policy.