What You Need to Know About Excess (Underwriting) - Part 4

By now, you would have acquired a good basic understanding of excess. But, do you know that other than Eldery Young & Inexperienced Driver (EYIDR), you might also experience a higher excess loaded by the insurer? I have listed a few examples below for your reference.

1. Endorsed driving license

It could be due to speed driving, hit and run, drink driving etc. Well, if you have your driving license revoked / suspended recently, it will affect your insurance premium and excess. The insurer will usually look at the duration of revoke, when it was revoked, alochol level, frequency, accident details, occupation etc to underwrite your proposal. If they do take in your case, you should expect a certain loading on your premium and excess accordingly.

2. High claim experience

In Singapore, you are required to declare any claim experience you have registered in the last 3 years. Let's assume you had a bad chain collision accident recently and being the last car of the accident, the liability is down on you. The total claim experience came up to $50,000. What will happen to your renewal? Well, if the insurer takes in your case, you might experience a loading on your excess, not to mention premium as well. The level of increase is dependable on the claim experience, no claim disount level before the accident(s), frequency of accidents, loyalty with insurer etc.

3. Frequency of accident

You might not have high claim experience in the last 3 years (E.g.1 at fault claim of $50,000) but you could have encountered 2 or more at fault claim with claim experience of say $10,000 in total. In such case, the insurer may also increase your excess due to high frequency of accidents. You might question the rationale behind this when the claim experience is much lower than the previous example. The answer is very simple. Higher frequency of accident means more claims of own damage and from Third Parties. You might have a low claim experience of $10,000 today but that doesn't mean you will always have a low claim experience. The next accident could be a fatal accident which can cost the insurer hundred of thousands, especially since it involves bodily injury.

A personal summary of Inside the Mind of an Underwriter

1. The underwriter is the central figure in determining what you will pay for your insurance.

2. There is a direct correlation between the quality of the information given to your underwriter, and the price you pay for insurance.

3. What seems mundane to you is very important to the underwriter.

4. There is nothing worse than sending up a submission without losses, and then finding out three weeks later that your losses are a lot worse than we were led to believe.

5. Underwriters actually look at customers' websites.

6. Loss control is the eyes and ears of the underwriter.

7. Insurance companies look at the relationship as a partnership and like companies that are willing to work with them.

8. Underwriters need time to effectively underwrite an account.

9. Typically, insureds don't know what makes an underwriter tick.

Inside the Mind of an Underwriter - Demystifying the Underwriting Process

A comprehensive article that let you understand the mind of an underwriter. I have bolded italic those i personally can relate to. Enjoy.

Have you ever wondered who that person is behind the curtain? Contrary to what you may think, it's not the Wizard, but the insurance company underwriter. Believe it or not, there is a real, live person on the other end of your insurance contract. The underwriter is the central figure in determining what you will pay for your insurance. Wouldn't it be nice to know what makes an underwriter happy? Conversely, wouldn't it be nice to know what upsets an underwriter?

There is a direct correlation between the quality of the information given to your underwriter, and the price you pay for insurance. Like the old adage, the less you put in, the less you get. The more you put in, the more you get. I know what a lot of you are thinking; "I'm not the one filling out the application, the broker is." This is of course true; but if you give the broker poor information, the underwriter will get that same poor information.

As brokers, we complete applications with an endless supply of "underwriting questions." If you've ever quoted your insurance, you know exactly what I'm talking about. What seems mundane to you is very important to the underwriter. I'm sure you've asked yourself (and your broker), "why do they want to know that?" Trust me; there are valid reasons for the underwriter's questions. Bottom line, the better the information given, the better the quote.

Are there multiple named insureds? Wouldn't it be wise to list all of the named insureds, and give a description of what they do? If you know you are going out to bid, make sure you have at least four years of currently valued loss runs before you ask someone to quote. There is nothing worse than sending up a submission without losses, and then finding out three weeks later that your losses are a lot worse than we were led to believe. You know the agent is going to ask for a complete drivers list; why not have it ready? Are you assigning markets so competing agents don't go to the same companies? You should.

Have you ever taken a good hard look at your website? Is it completely accurate? Are there maybe some things on the website that aren't completely true? Business owners are proud of their company and their capabilities. Sometimes they have a tendency to boast about things they don't (or haven't) done. For example, a manufacturer might say he is capable of producing products for the aerospace industry, when, in fact, they never have. Are they capable? Sure they are, but they never have.

Underwriters actually look at your websites. In fact, good underwriters go over it with a fine toothed comb. What might be prideful boasting to you (above example), is a red flag to the underwriter. Do you think your underwriter is going to be aggressive, or even quote an account that does work in the aerospace industry? Not in a million years! I know it's tempting to overstate your capabilities, but realize your prospects aren't the only one's looking at your website. Only highlight what you actually do, nothing more, and nothing less. Don't give the underwriter reasons to ask even more questions, especially it they are unwarranted. (Boaz : This is interesting, don't create troubles for yourself)

I would be remiss if I didn't mention the relationship between the underwriter and the loss control representative. Loss control is the eyes and ears of the underwriter. Very rarely does an underwriter get to visit with an insured either during the quoting process, or after they've become a customer. They rely on the findings of the loss control department. If you want to impress the underwriter, you must first impress loss control!

You should do everything you can to make sure the loss control visit goes smoothly. The loss control rep's job is to do a physical inspection and report back to the underwriter with his/her findings. Do you have bad housekeeping? Are the proper safeguards in place? What is your attitude towards safety and the minimization of losses? Are you receptive to their suggestions? Are you confrontational? Believe me, all of these things get back to the underwriter and are reflected in the pricing.

One of the worst things an insured can do is quote his insurance every year. I know the temptation is to save money. If your broker is doing his job, and not taking you for granted, he will work with the existing carrier on a competitive insurance program. If you quote your insurance every year, you are doing yourself a disservice. Insurance carriers like to quote business they think they have a legitimate shot at writing. Say in 2004 you quote your insurance with a few carriers. In 2005 you do the same thing again. In 2006 you decide to go out to bid again. Believe me; the carriers who quoted, and didn't get your account in the two previous years, more than likely won't be quoting in that third year. They will do one of two things: either not quote, or they'll just throw out a number without dedicating any time or energy to your account.

I think everyone can relate to how an underwriter thinks when it comes to a company that quotes every year. I'm sure most of you have "suspects" of your own that always want you to give them a price, with no intention of ever giving you the business. They simply want to keep their current supplier "honest." Do you yourself put much time and effort into these accounts? The answer is probably no, so why should an insurance company be any different? By quoting your insurance every year you get a bad reputation, and no reputable broker will be willing to work with you. I know it's tempting, but don't do it! Of course if your relationship with your current broker has soured, then by all means you should look elsewhere. Insurance companies look at the relationship as a partnership and like companies that are willing to work with them. I'm not saying don't look at your insurance, just don't do it every year.

My last point is the underwriter's time. Underwriters need time to effectively underwrite an account. Ideally, they like 2-3 months lead time. Reason being, if you wait until the last minute, and your insurance comes up during a busy time of the year, they might not have the resources available to provide you with a competitive quote.

Most underwriters are good at what they do, and they should be respected. Typically, insureds don't know what makes an underwriter tick, and hopefully this article has enlightened you as to how they operate behind that "curtain."

http://EzineArticles.com/?expert=Chris_Sheppard

Who can be an Underwriter?

Are you results focused?

Do you have the ability to trade and negotiate within a fast moving, constantly changing market place.

Do you possess an enquiring mind, the ability to probe, analyse and provide a sound rationale for actions taken.

Wait! I'm not implying that with the above, you can be an underwriter - a good one. The list is not exhaustive . . .

It does help that you possess the minimum hardware to handle the technical aspect but it is of utmost importance that you know how to manage the relationship with agents, brokers and business partners. Without software, the hardware is not able to unleash its full potential. Having the hardware is only the basic requirement!

What is an Underwriter?

"What's that?"

It's funny but for people who are probably not related or in financial or insurance industry, they always give me the strange look. Some will reply, "Undertaker?"

The work of an underwriter is actually quite challenging.

In the insurance industry, an underwriter agrees to pay for things like damages to homes and cars, or health insurance, in exchange for regular premiums paid by the person or firm requesting insurance underwriting. The fees for insurance vary, depending on the individual risks that the person being insured represents. Insurance underwriters are trained to assess these risks and to charge accordingly. For example, an insurance underwriter might request an additional premium for fire insurance for a structure in a region which often experiences fires.

Thus, to underwrite means to agree to accept liability, or responsibility for possible losses by clients. You also set the conditions in the contract by reviewing the client's previous losses and other information.

In short, the role of an underwriter is to ensure the profitability of the principal by writing good risk. It is not a pleasant role, especially in competitive market where there will be seasonal price war among the principals.