Insurtech

Insurtech is insurance sold, underwritten or serviced through software, and the legal questions are the ones insurance regulation has always asked, now put to a company that may hold no license of its own. The first is which carrier is the insurer of record and whether it holds a certificate of authority in every state where policies are sold. The second is who sells, since soliciting insurance requires a producer or limited-lines license in the buyer's state. The third is whether the insurtech has become a managing general agent by writing premium equal to five percent of the carrier's surplus while adjusting claims, which brings contract and audit duties. The last is the data behind the model, because rating on external consumer data engages the unfair-discrimination statutes and, where the data comes from a consumer reporting agency, the Fair Credit Reporting Act's adverse-action notice.

The work begins with a licensing map: which entity in the structure is the insurer, which is the producer and which is the administrator in each target state, and which of those licenses the insurtech must hold itself rather than borrow from a partner. We then paper the capacity chain, meaning the program agreement with the fronting carrier, the reinsurance behind it and the collateral trust or letter of credit that earns the carrier its statement credit, so that responsibility for a claim can be traced on paper from the policyholder to the party priced to carry it. Alongside that we draft the data and vendor terms and the model-governance file a state examiner will ask for, and we handle the financings and acquisitions of the business with a diligence list built around licenses, reserves and treaty expiry dates. One partner holds the whole file.

It depends on the role. A company that underwrites and carries risk needs to be a licensed insurer or to partner with one; a company that distributes or administers may need producer, MGA, or third-party administrator licenses instead. We map the activities to the licenses they require in each jurisdiction and structure the arrangement so the right party holds the right authorization, with locally admitted counsel brought in where a jurisdiction requires it.

A managing general agent underwrites and administers business on a carrier's behalf under delegated authority, while a fronting carrier issues the paper and cedes most of the risk to reinsurers or capacity partners. These structures let an insurtech reach the market without standing up a full carrier. The delegation terms, the capacity agreements, and the regulatory credit for the risk transfer all have to be documented carefully, because they decide who is responsible when a claim is paid.

Three regimes apply at once. State insurance law bars unfair discrimination in rating and, in a growing number of states, requires a written governance program for any model used in underwriting, pricing or claims, following the NAIC's 2023 model bulletin; Colorado goes further and requires insurers to test external consumer data and the algorithms that use it for unfairly discriminatory outcomes. The Fair Credit Reporting Act applies whenever a decision rests on a consumer report, which includes credit-based insurance scores and many third-party data feeds, and it requires an adverse-action notice naming the source. State privacy laws govern the collection and vendor transfer of the data itself. In practice a general counsel needs a model inventory with documentation of what each model ingests, a person who can explain any declination, and vendor contracts that allocate liability for data the insurtech did not gather.

Yes. Within the United States the expansion is state by state: nonresident producer licenses issued on the home-state license, forms filed or surplus-lines placements arranged in each new market, and an MGA appointment with the carrier for each state the program enters. Outside it the regime changes rather than multiplies. In the United Kingdom insurance distribution is a regulated activity requiring the FCA's authorization or appointed-representative status under an authorized principal, and in the Dubai International Financial Centre intermediation needs a DFSA license. We run the US program and coordinate it with our partner firms in London and Dubai and with locally admitted counsel elsewhere, so the same product is not redesigned for each regulator after launch.