Delegated claims handling
The insurer hands its claims handling to a third party acting on its behalf, and remains answerable for what that delegate does.
Article 49 of the Solvency II directive governs the outsourcing of critical or important functions and activities. An insurer that delegates its claims handling stays fully answerable for what its delegate does, including the case reserves opened in its name, and must be able to show it controls the chain. Delegated claims handling hands settlement to a third party, a wholesale broker, a specialist platform or an independent administrator, acting for the risk carrier. The model took hold in high volume, low average cost lines, where the delegate's scale makes the difference, and in niches where the insurer lacks the technical skill. The sore point is alignment of interests. The delegate is mostly paid per file or as a percentage of premium, rarely on settlement quality, while the under-reserved file or the recovery never pursued ends up in the insurer's accounts. Hence the duty to check the reserves opened and to keep the means to take handling back. The chain can line up as many as three intermediaries, each taking a margin, which regulators have flagged in several markets.
Article 49 of the Solvency II directive frames the outsourcing of important activities: the insurer stays fully answerable for what its delegate does, including the quality of case reserves opened in its name, and must be able to show it genuinely controls that chain.
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