In the United Kingdom, insurers enter into agreements with coverholders. These brokers act as agents for insurers, writing insurance contracts on their behalf and serving as their local representatives. Coverholders enable insurers to extend their geographic reach by benefiting from local knowledge of risks and market conditions in other parts of the UK or the world.
Acting on insurers' behalf, coverholders collect premiums, pay applicable taxes and fees, issue policy documents and sometimes settle claims. Coverholders provide insurers with regular updates about the amount of business they have written, the premiums they collect, the risks covered by the policies and more.
Benefits to Insurers
Coverholders enable insurers to enter a global range of local markets without having to hire staff, open offices and maintain the business presence necessary to attract the clientele they desire. Withdrawing from an unprofitable market simply requires ending the relationship with a coverholder.
As insurers' representatives, coverholders tap into the prestige, ratings and broad market presence of much larger firms. The direct relationship with insurers gives coverholders access to insurance products they otherwise might not be able to offer.