Delegated and Non-Delegated Underwriting: Demystifying Key Strategies in Risk Assessment


In the ever-evolving landscape of the insurance industry, underwriting serves as the cornerstone, helping insurance firms to manage risks and maintain profitability. Today, we delve deep into the intricacies of this critical process, distinguishing between two primary methodologies for underwriting – delegated and non-delegated.

Understanding the difference between these strategies, their strengths, and potential challenges is instrumental in making informed decisions for the benefit of insurers, policyholders, and the industry as a whole.

Delegated Underwriting

Delegated underwriting is a model where the insurer assigns the underwriting process to external specialists known as Managing General Agents (MGAs). The MGA acts as an intermediary between the insurer and the customer and is responsible for assessing risk, pricing policies, issuing coverage, and sometimes handling claims.

The advantage of this approach is that it allows insurers to diversify their risk portfolio and gain exposure to markets and segments they might not be able to access directly. Moreover, MGAs often have niche expertise, which enables them to effectively price and manage certain types of risks that a larger insurance company might need to gain the in-house expertise to understand at the same granular level.

Non-Delegated Underwriting

In contrast, non-delegated underwriting is when the insurer retains full control over the underwriting process. This means that all risk assessments, policy pricing, and issuance are done internally by the insurer’s team of underwriters.

The primary advantage of non-delegated underwriting is that the insurer retains direct control over every step of the process. This can lead to a more consistent approach to risk assessment and pricing. However, it may limit the insurer’s ability to access and effectively price certain niche markets.

Delegated vs Non-Delegated Underwriting: Which to Choose?

Deciding which type of underwriting is best often depends on several factors, including the insurer’s size, risk appetite, and market focus.

With delegated underwriting, insurers can quickly expand into new markets, leverage the expertise of MGAs in niche sectors, and often manage overhead costs more effectively. However, insurers using this method also need to have robust systems in place to oversee these delegated entities to ensure that underwriting standards and regulatory compliance are being maintained.

Non-delegated underwriting allows insurers to maintain full control over the underwriting process, ensuring a uniform risk assessment approach under their operation structure and potentially strengthening relationships with clients due to direct interaction. However, this method can limit the speed of market expansion and requires significant investment in building internal expertise for various industries and sectors.

At Accelerant, we understand the complexities of choosing the right underwriting approach. Our technology-driven solutions are designed to support both models, enabling insurers to maintain rigorous oversight in a delegated model or enhance efficiency and analytical depth in a non-delegated model.

Whichever approach you choose, remember that technology can play a key role in optimizing your underwriting process. With robust analytics, AI-driven risk assessment, and streamlined process automation, insurtech can transform how insurers do business, delivering enhanced profitability, agility, and customer satisfaction.

Stay tuned to the Accelerant blog for more insights into the fast-paced world of insurtech!