By Allison McGreal, Assistant Vice President, PartnerOne Environmental
As an underwriter it’s important to understand what motivates the broker and the insured to purchase a particular insurance policy. Perhaps they are looking for a specific type of coverage or maybe the premium is an important factor. It could be that one carrier offers a more comprehensive form or it could be to satisfy a contract requirement. Each of these areas may effect how the policy is underwritten.
Conversely, it’s important for a broker to understand what motivates an underwriter to provide a quote and ultimately choose to bind an account. Underwriting is a process, not an exact science, so it’s crucial to understand the market, the carrier, and the underwriter appetite to comprehend why certain risks are a fit while similar risks are not.
A plethora of information may be provided with each submission and it’s up to the underwriter to sort through and evaluate each account’s unique exposures. The initial step is to review the application for eligibility. That may include anything from the services provided and the revenue size to the financial condition of the entity and qualifications of their staff.
Initially the underwriter will carefully review the services section of the application for critical information. To think like an underwriter, which will expedite the quoting process and ultimately a broker’s ability to bind the account, it’s important to review the application before submitting to the carrier. An application stating “environmental contracting” probably isn’t detailed enough to fully understand the risk or to properly rate it. Each operation has a separate and distinct class code and associated rate so while that minimal information “environmental contracting” may be enough to identify the account as a probable fit, there’s no way to evaluate the exposures and properly underwrite the risk. Having the insured offer a more detailed breakdown of both their services and revenues is the best way to “pre-underwrite” the account. Another example is an application that comes in showing that the entity performs fire and water damage restoration. To properly underwrite the risk, we need to understand what percentage of the work is related to the environmental services vs. build back/reconstruction or other operations.
Underwriters will also perform a comprehensive review of the insured’s financials, including the revenue history and any discrepancies. If the application shows they are projecting $1,000,000 this year but the financials indicate they did $2,000,000 in the prior year, it may raise an underwriting question that will need to be addressed. The underwriter will want to know why they are dropping down so significantly from the prior year. Have they reduced their staff? What is the overall financial condition of the firm? What are the financial trends of the firm? A broker can assist with pre-underwriting the account by reviewing the financials and addressing any of these questions on the front end. This way the underwriter will have the full body of related information before making any determination about offering terms.
Another way for an agent or broker to think more like an underwriter relates to qualifications of staff or subcontractors. Underwriters take into account prior related experience, certifications, and licensing as well as additional education or training the applicant and staff have. Resumes can help an underwriter understand the insured’s qualifications and speed up the process, especially for new ventures. When offering Professional Liability, hard science degrees may be required to ensure they have the proper understanding to perform their duties. Similarly, when hiring subcontractors or consultants, it’s important to ensure these hires are as qualified to do the work (or more so) than your own staff. Often subs are hired to perform certain technical trades and you’ll want to ensure they have the expertise to do so.
Last but certainly not least, is the loss history of the firm. Brokers tend to see an account with no “paid” claims and think that’s the same as providing loss runs with no claims at all. An underwriter may dig a little deeper into the nature of the claims to see if there is a pattern developing. For example, were the claims all related to unsecured jobsites, in which case more information on their jobsite safety may be requested? Or perhaps they were all related to contract wording, which may start a conversation about adjustments that should be made to their standard Â agreements
No one expects a broker to do an underwriter’s job any more than the underwriter can do the broker’s job. But having a mutual understanding will certainly ease the process. The ultimate goal is to write good business together and any steps taken to that end should be appreciated by brokers and underwriters alike.