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Lloyd’s Requirements

Lloyd’s Policy Level and Procedural Requirements for the writing of master/group policies

Lloyd’s Requirements are made up of Policy Level Requirements and Procedural Requirements.

Policy Level Requirements

Managing agents should only write insurance schemes as master/group policies where the arrangement is compliant with the following Policy Level Requirements. Where a scheme does not meet the Policy Level Requirements a different arrangement should be used for the distribution of the product, such as a binding authority. 

1. Clearly Identifiable and Genuine Groups

The Customers must belong to a clearly identifiable and genuine group, for example by virtue of common employment, association, occupation or activity and that connection must exist other than by reason of having the benefit of the master/group policy.

Customers whose only connection is that they purchased the same product or service from a vendor will not satisfy this requirement unless there is a genuine ongoing customer relationship (through the continuing provision of a non-insurance service) which gives rise to a clearly defined group. The continuing service provision should be indefinite or at least very long term and not limited by, for example, a 12 or 24 month contract.

2. Legitimate Interest in Providing Cover

The master/group policyholder must have a legitimate interest in providing cover for the defined group of members.

Lloyd’s would not regard the ability of the master/group policyholder to generate a fee, commission or other payment for providing cover to the members as being a sufficient “legitimate interest” for these purposes. The master/group policyholder should not have as its principal purpose or as a core part of its business the procurement of insurance for its members. Implicit in this requirement is that the policyholder provides substantial non-insurance benefits to its members.

3. Remuneration

Master/group policyholders may receive some form of remuneration for administering the master/group policy. Ordinarily this should be limited to a sum to cover the reasonable costs of administering the policy. A master/group policy should not be used as a vehicle for the master/group policyholder to generate profit.

We would generally expect to see remuneration by way of either:

  • A percentage commission commensurate with the work performed; or
  • A fixed administration fee commensurate with the work performed.

Master/group policyholders should not be given profit commissions.

Note that in some jurisdictions master/group policyholders are not permitted to receive remuneration or may require approval to carry out regulated activities before they are able to receive remuneration.

4. No discretion

The master/group policyholder or other administrator of the master/group policy should have no discretion as to who can be declared to the policy or as to the premium charged or terms of coverage, nor should they provide any advice regarding the insurance coverage.

This means:

  • All members of the group should be eligible to receive coverage under the master/group policy;
  • Premium should be calculated in the same way for all Customers; and
  • Rating tables with multiple factors should not be used to calculate premium.

This, however, does not prevent master/group policies providing different options to members of the group. For example, a group health scheme may offer different options for family and individual cover, or a travel policy may offer different options for European and worldwide travel.

For life and health cover it is acceptable for an upper age limit to be in place and for the Customer to be required to sign a declaration of health as a prerequisite of cover.

5. Insurance Documentation

The master/group policyholder should not produce insurance documentation on behalf of underwriters. However, appropriate confirmation or details of the cover that has been purchased must be provided to the Customers. Subject to any local licensing requirements, these details may be provided by the master/group policyholder or an alternative administrator.

The evidence of cover should provide, at a minimum, sufficient detail for the Customer to understand the cover in place and how to make a claim. The documentation must refer to the master/group policy as the insuring document and Customers must be able to access the full master/group policy wording on request.

In the case of corporate travel policies purchased by employers it is not necessary for all staff to be provided with evidence of cover. However, the employers should be obligated to provide employees with access to the policy wording. For the avoidance of doubt this exception does not apply to personal travel policies distributed via an employer e.g. as part of flexible benefits and these policies therefore remain subject to the requirements set out in the paragraphs above.

6. Contract Certainty

The master/group policy wording should satisfy all contract certainty requirements as for any other insurance contract. Particular attention should be given to ensuring the following are clearly set out:

(a) The roles and responsibilities of each party (managing agent, master/group policyholder and any broker, coverholder or other administrator) including in relation to:

  • Issuance of documentation
  • Calculation and collection of premium
  • Claims handling
  • Complaints handling
  • Production of bordereaux or other data

(b) The terms and conditions of coverage. This may be in an appendix.

(c) The remuneration agreement

(d) Termination provisions (ensuring they do not risk causing undue detriment to the Customer)

7. Aggregate limits and deductibles

Master/group policies must not be subject to shared aggregate limits or deductibles.

There are two exceptions to this requirement:

  • Shared aggregates are permitted in corporate travel policies purchased by employers. For the avoidance of doubt this exception does not include personal travel policies distributed via employers e.g. as part of flexible benefits and these policies therefore remain subject to this requirement.
  • Aggregate event limits for employer group schemes are permitted in relation to catastrophe events e.g. terrorist attack, plane crash provided that the limit is only likely to be reached in an event which involves the majority of customer employees.  In such a scenario if the event limit is reached we would generally expect that the claim payment should be distributed pro rata between the affected customer employees.

8. Claims Handling Authority

Master/group policyholders must not have claims handling authority but they may be responsible for receiving claims notifications for onward transmission to underwriters. Any responsibility in this regard should be clearly stipulated in the master/group policy. Customer documentation must clearly set out how the Customer can make a claim and should include an option to submit claims directly to the managing agent (or its coverholder or delegated claims administrator).

9. Complaint Handling Authority

Master/group policyholders must not have complaint handling authority. It may be that master/group policyholders receive complaints initially and the master/group policy should therefore set out expectations with regard to recognising complaints along with instructions for referral. Customer documentation must clearly set out how the Customer can make a complaint directly to the managing agent (or its coverholder or delegated claims administrator).

10. Obtaining Appropriate Data

Managing agents must ensure they are able to obtain appropriate data from the master/group policyholder or other administrators to enable to them to monitor the business. In determining the appropriate level of data to collect managing agents should have regard to the importance of claims handlers being able to determine whether a claimant has coverage in a timely way.

11. Local Rules and Regulations

Managing agents must ensure master/group policies comply with all relevant local rules and regulations in addition to Lloyd’s Requirements.

Linked below is a simple checklist which summarises the Requirements above and may be used to help determine whether an arrangement meets the master/group Policy Level Requirements.

Procedural Requirements

In order to manage the writing and ongoing oversight of master/group policies managing agents are expected to have appropriate procedures in place. Such procedures should be designed to ensure compliance with the Policy Level Requirements and should at a minimum provide for:

  • All master/group policy products to be subject to a Conduct Risk Assessment and Product Review at product level in line with all other business. For products that are permitted to be written under master/group policies the customer risk should be assessed in relation to the Customer, not the master/group policyholder.
  • Documentation of the reasons for writing the business as a master/group policy and how the managing agent satisfies itself that all the Policy Level Requirements of a master/group policy are met.
  • Proportionate due diligence to be conducted and recorded to determine that the master/group policyholder and any other administrator are capable of performing their responsibilities under the contract.
  • Appropriate internal sign off of master/group policies.
  • A record of all master/group policies to be maintained.
  • The regular review of master/group policies to ensure they continue to comply with the Lloyd’s master/group Policy Level Requirements as well as an assessment of performance, value, regulatory compliance, conduct risk factors and due diligence.
  • A proportionate approach to be taken where a managing agent follows on a master/group policy.
  • Oversight of coverholders with authority to write master/group policies.