Claims

What Is Delegated Authority in Insurance? An Australian Guide

ClaimsGateway

16 Oct 26

•

min read

Delegated authority is when an insurer lets another party, usually an underwriting agency, bind cover or settle claims for it within agreed limits. In Australia the legal vehicle is a binder. Underwriting authority and claims authority are separate grants. The insurer stays responsible for both, so it expects a record of every decision made in its name.

This article is general information, not legal or compliance advice. Check the current text of the code, standard or legislation, and take advice for your situation.

Key takeaways

Under the Corporations Act, a binder lets a party enter into insurance contracts, settle claims, or both, on an insurer's behalf.
According to the Underwriting Agencies Council, its more than 130 member agencies are responsible for over $10.5 billion of premium a year.
Claims authority is a separate grant from underwriting authority, and it usually carries settlement limits and referral rules.
According to ASIC, handling and settling insurance claims has been a financial service needing an AFS licence since 1 January 2022.
Authority limits that live in people's heads are the weak point, because nobody can audit a limit that was never written into the process.

What is delegated authority in insurance?

Delegated authority is an arrangement in which an insurer lets another party act for it, within limits. That party may write policies, settle claims or both, and it does so in the insurer's name. In Australia the arrangement is usually set out in a binder, and the insurer remains accountable for everything done under it.

The Corporations Act defines a binder in section 761A. It is an authorisation from an insurer that holds an Australian financial services licence. The authorisation lets a person enter into risk insurance contracts on the insurer's behalf, deal with and settle claims on its behalf, or do both. So the same legal instrument can grant underwriting power, claims power, or the two together.

For example, a specialist agency writing marine cargo may bind policies up to a set sum insured and settle claims up to a set amount. Above those limits, it refers the decision back to the insurer. The agency does the work, while the insurer carries the risk and the regulatory responsibility.

Who holds delegated authority in Australia?

Underwriting agencies are the main holders of delegated authority in Australia, followed by Lloyd's coverholders and some brokers that hold binders. Each acts for one or more insurers under written authority. The insurer that grants the authority, often called the capacity provider, carries the risk on the policies written.

According to the Underwriting Agencies Council, its more than 130 members represent the vast majority of Australian underwriting agencies. In addition, those members are responsible for more than $10.5 billion of premium spent by Australian businesses and consumers each year. That makes delegated authority a large part of the market rather than a niche. The guide to underwriting agencies explains how agencies are set up and paid.

Lloyd's coverholders work in a similar way, holding authority from Lloyd's syndicates rather than from an Australian insurer. Some brokers also hold binders for particular products. The guide to binders and coverholders covers the differences between the three.

What is the difference between underwriting authority and claims authority?

Underwriting authority lets a party accept risks and issue policies on the insurer's behalf. Claims authority lets it decide and pay claims on the insurer's behalf. They are separate grants, often with different limits. An agency can hold full underwriting authority yet still need the insurer's approval for any claim above a set amount.

Claims authority usually comes with three kinds of limit. First, a settlement limit sets the most the agency may pay on one claim without referral. Second, referral triggers cover cases such as a suspected fraud, a disputed liability or a claim likely to exceed the limit. Third, an approval rule names who approves above the limit, usually a named claims manager at the insurer.

In practice, the difference matters because claims authority is exercised one claim at a time, under time pressure. A policy is written once. A claim, by contrast, can need a decision every week for months. So claims authority is where limits are most likely to be stretched, forgotten or applied unevenly between handlers.

How do insurers oversee delegated authority?

Insurers oversee delegated authority through the binder terms, regular reporting, referral rules and audits. The agency reports what it has written and paid, usually in bordereaux. The insurer checks that work against the authority it granted. Because the insurer stays accountable, it expects a clear record of every decision made in its name.

Bordereaux are the routine part of that oversight. A claims bordereau lists the claims an agency handled, with status, reserves and payments, typically each month. The bordereau explainer sets out what one should contain. Audits are the periodic part, when the insurer samples files to test whether limits and procedures were followed.

Regulation adds weight to both. According to ASIC, claims handling and settling has needed an AFS licence since 1 January 2022. ASIC's guidance explains when insurers, claims managers acting for insurers and brokers need that licence. At the same time, the Code Governance Committee recorded 70,325 Code breaches in 2024-25, and according to its figures 59% related to claims. An insurer reading those numbers looks hard at the claims done in its name.

What does delegated authority mean for claims operations?

For a claims team working under delegated authority, the authority is only as good as the process that applies it. Limits written in a binder but held in handlers' heads get applied unevenly. Limits built into the workflow, so that a claim above the limit cannot be settled without referral, get applied the same way every time.

Most agencies start with the first approach. A small team knows the limits, and a spreadsheet tracks the referrals. That works until the agency adds a second insurer with different limits. It also strains when a third product arrives, or a new handler learns the rules second-hand. At that point the agency cannot easily show its insurers that every claim stayed within authority.

The second approach treats the binder's rules as configuration. Each product or scheme gets its own workflow, with its own approval steps and referral points. For example, a configurable claims platform such as ClaimsGateway (claimsgateway.com) lets the business change those workflows itself, without developers, as an insurer's requirements change. The underwriting agencies page describes that approach.

How should an agency approach its claims authority?

Start by writing every limit down, product by product and insurer by insurer, before choosing any software. Then decide where each limit is enforced: in a person, a checklist or the workflow itself. The aim is a record that shows an insurer, claim by claim, that its authority was respected.

Three questions help. Where does each settlement limit live today, and who would notice if it were exceeded? How quickly could the agency take on a new insurer's limits without retraining every handler? And can the agency show an auditor the referral history of any claim within minutes?

Some agencies find their claims process has outgrown spreadsheets. For them, ClaimsGateway is a sensible option where the aim is claims workflows they can change without developers, kept separate from the policy system. An agency that wants policy administration and claims in one system may prefer an MGA platform instead. The claims software list for agencies compares both routes.

Frequently asked questions

What is a delegated authority agreement?

A delegated authority agreement is the contract in which an insurer authorises another party to act for it, usually to write policies, settle claims or both. In Australia it is commonly called a binder. It sets out what the party may do, the limits it must stay within, how it reports and how the insurer audits it.

What is the difference between a binder and delegated authority?

Delegated authority is the general idea of an insurer letting another party act on its behalf. A binder is the legal instrument that grants it in Australia, defined in section 761A of the Corporations Act. So every binder is a form of delegated authority, and the binder is where the authority's scope and limits are written.

Who regulates delegated authority in Australia?

Several bodies are involved. ASIC regulates financial services, including claims handling and settling since 1 January 2022, and the Corporations Act defines binders. APRA supervises the insurers that grant the authority. Insurers that subscribe to the General Insurance Code of Practice also answer to the Code Governance Committee for claims handled on their behalf.

Can a broker hold delegated claims authority?

Yes, a broker can hold a binder that includes claims authority, typically for particular products and up to set limits. When it does, it handles and settles those claims on the insurer's behalf rather than as the client's advocate. That change of role matters, so brokers holding binders usually separate binder claims from their advocacy work.

What happens when a claim exceeds the agency's authority?

The agency refers the claim to the insurer. Usually that means sending the file, its assessment and a recommendation to a named claims manager, who approves, adjusts or declines the proposed outcome. The agency keeps handling the claim but cannot settle it alone. A clear record of each referral is what auditors look for.

About the author

ClaimsGateway builds cloud claims management software for insurers, underwriting agencies, brokers, TPAs and self-insured organisations in Australia and New Zealand. Every regulator figure in this article links to its source, and every vendor fact was checked on the vendor's own site on the date shown.