To scheme or not, that is the question
I have seen many different variations of what constitutes a scheme, and if you speak to different insurers you are likely to receive any number of conflicting views on what a scheme actually is.
A scheme can often be confused with delegated authority arrangements. However, these are very different trading capabilities that can deliver brokers very different results. The key is to be clear about what you want to achieve and what you are capable of delivering; define your proposition and ask yourself if what you are offering is similar to others in the market.
Research is key to any successful scheme, so ensure your product is market oriented and designed with your potential customers in mind - don’t just think about what customers want, ask them.
Once you have designed your proposition, now is the time to ask yourself the inevitable - to scheme or not to scheme. This will depend on your desire to set your own selling price using a net-rated product and whether you want to white label your facility, not forgetting internal capabilities such as systems and underwriting expertise.
Remember, a scheme is effectively giving you the freedom to accept risks on behalf of the insurer. The skills and expertise to do this is just one of many deciding factors.
A scheme offers brokers full control and flexibility over their whole product and proposition, including bespoke policy wording and rating, full control over administration and branding and, in many circumstances, a choice over their claims handling arrangements. On the strength of this, insurers can and should demand a higher GWP commitment.
On the other hand, delegated authority arrangements give brokers an attractive alternative to schemes, which also allow the broker an element of control and fl exibility, with what is often a six-figure GWP commitment. Wording and rates are typically provided by the insurer. However, the broker may issue policies but possibly use the insurer’s systems. There is less flexibility around claims, which are usually administered by the insurer or their preferred claims handler.
Depending on the answers - think about which insurer to approach - do you need an ‘off the shelf’ product or a specialist insurer who can provide help and guidance with the product build? Ensure that you partner with an insurer that is flexible and can work with you and your skills, to develop new ones and recommend a solution that works for you.