Underwriting leaders at commercial carriers carefully monitortheir portfolios and constantly define necessary adjustments totheir underwriting strategies (e.g., re-balancing the product mixfor some classes of risks, growing specific industry segments).That’s the relatively easy part. Translating and communicatinghigh-level directions for ‘front line’ underwriters (i.e.,underwriters assessing risks on individual accounts) to follow istypically where execution breaks down. Carriers with scale relyingon large and decentralized networks of underwriters are even moreexposed to this common execution challenge.

Related: Creating an underwriting information advantagethrough cross-functional efficiency

The art of articulating underwriting strategies is to translatehigh-level directions into actionable pieces of information thatcan be leveraged across the process of underwriting individualaccounts. If done well, there is an opportunity to effectivelyguide every single intermediary step and decision in theunderwriting process. The ultimate outcome is a perfectly executedunderwriting strategy.

1. Prequalify risk

One of the first tasks front line underwriters do each day is tosift through a long list of new business submissions. The list istypically much longer than they can handle and they have to decidewhich ones they will work on for the day. Depending on the line ofbusiness, type of account, and associated productivity standards,underwriters may be able to work on only one submission, so theyhave to choose wisely. Considering the many factors that come intoplay as they pre-qualify submissions. Underwriters have to veryquickly to identify which submissions fir their carrier’sunderwriting appetite, where they are competitive, and where theprobability of closing the deal is high.

What submission(s) should I focus on today?

• What is in my appetite? → Appetite Guides
• Where am I competitive? → Priority Risk Classes

2. Supplement & assessrisk

Once a risk has been pre-qualified, a thorough and potentiallytime-consuming investigation, which can be prone to oversighterrors typically begins. At this stage, it is critical to identifyand focus on the right pieces of information, not to waste time ongathering irrelevant information, or miss importantconsiderations.

What information should I consider to underwrite this risk?

• What questions should I ask myself? What additional informationshould I ask the producer to provide? → SupplementalApplication
• Should I perform a physical inspection? → Risk ControlGuidelines
• What are the verified exposures and controls? → Risk ControlReport
• What is the exposure? Is this the right risk? → UnderwritingGuidelines, Worksheets to Quantify Exposure
• How should terms and conditions be adjusted? → List ofExclusion Endorsements
• What is our capacity to take on this risk? → High ConcentrationAreas
• Should I purchase facultative reinsurance? → ReinsuranceGuidelines

3. Price risk

Pricing is a balancing act between growth andprofitability. While it is critical tocharge enough premium to cover losses and expenses, pricing mustalso be competitive enough to win the business. In order to meetgrowth and profitability targets, the underwriting strategy mustbuild out a pricing framework that addresses the followingquestions:

• What premium should I include in the quote?
• How much should I deviate from technical price based on thequality of risk? → Predictive Models
• What company placements, credits, and debits can I apply to getto the right price? → UW Guidelines

4. Negotiate deal

Underwriters often need to negotiate with producers. It is atthis stage that underwriters have an opportunity to trulydemonstrate their industry and line of business expertise bydescribing how the proposed solution meets the insured’s needs.Highlighting competitive differentiators such as unique coverageand services (e.g., risk control, claims) can help an underwritersell a higher quoted premium. Alternatively, applying higherdeductibles or reduced limits can allow an underwriter to reduceexposure in order to meet a client’s premium demand. Once again,key elements of a comprehensive and well-articulated underwritingstrategy can help underwriters prepare for these difficultdiscussions.

How do I convince the producer to accept the deal?

• To what extent does the proposed solution meet the insured’sneeds? → Insured needs analysis
• How competitive are our products and services? → CompetitiveDifferentiators

Carriers can face several pitfalls when articulating theirunderwriting strategy:

1. |
   1. Large gaps force underwriters to apply unsupportedjudgment.
   2. Strategies are too uniform, missing important nuances, or tooinconsistent, hindering efficiency and scalability.
   3. Strategies conflict across functions, yielding inconsistentunderwriting outcomes.
   4. Underwriting strategies are not directly applicable tocustomers, creating an inconsistent market offering.

Carriers can avoid these pitfalls by ensuring their underwritingstrategy is 1) comprehensive, 2) tailored, 3) integrated, and 4)market ready.

1) Comprehensive underwritingstrategy

Articulating a comprehensive underwriting strategy facilitatesinformed and consistent underwriting decision-making. This isespecially beneficial to inexperienced underwriters who arelearning which considerations they need to weigh when underwritingan account. While experienced underwriters understand how toevaluate risks, they still depend on a well-defined strategy tounderstand the carrier’s appetite, where the carrier is willing totake bigger risks, and where the carrier has the strongestcompetitive advantage in terms of product solutions, risk control,and claims. While underwriters still apply specialized knowledgeand experience while judging risks, developing a comprehensivefoundation reinforces organizational alignment and qualityunderwriting.

A comprehensive underwriting strategy addresses five core areasthat need to be defined for every business unit and/or line ofbusiness.

It is important to capture this information in a consistentformat from different customers, products, and functions.Consistency creates efficiencies by minimizingretraining/cross-training time, simplifyingmulti-line/cross-customer accounts, and simplifying technology andtool design. Take the example of a technology company that alsomanufactures the hardware used with its products. Technology andmanufacturing underwriters will be able to compare, contrast, andbalance each individual’s underwriting strategy if they bothexpress their strategies consistently. Both underwriters should beable to quickly identify the other’s appetite, products, and keyexposures, which will help achieve consensus sooner and moreconsistently.

Articulating a comprehensive underwriting strategy in aconsistent format allows underwriters to understand their role inexecuting the organization’s goals, core concepts andconsiderations when evaluating a risk, how the carrier isdistinctly positioned for success, and how to correctly execute theunderwriting process.

2) Tailored underwriting strategy

Creating and maintaining comprehensive underwriting strategiescan be time-consuming and expensive. Fully articulating theunderwriting strategy for one industry sector may require a team ofsenior underwriters to put pen to paper for several weeks, if notmonths. This work usually comes at the expense of other criticalactivities (e.g., prospecting new accounts).

While consistency is important, it is critical not to try toforce an underwriting strategy into a mold that does not fit. Theright approach is allowing different levels of granularity thatreflect the specialized needs of each area, but delivers theunderwriting strategy in a consistent format.

3) Integrated underwriting strategy

An integrated strategy should reflect the priorities andstrategic actions of several functional areas; it shouldincorporate product, customer, risk control, claims, and point ofdistribution. Underwriters struggle to balance functionalconsiderations if they are not fully integrated. Articulating anintegrated underwriting strategy means demonstrating how eachfunction fits together to propel overall strategic direction, andensuring that all content, pricing tools, processes, and pipelinesalign.

If the goal is to grow media accounts, then product initiative Awill improve the media liability product, distribution initiative Bwill target brokers that specialize in media accounts, and riskcontrol initiative C will focus on implementing controls to protectmedia companies from data breaches. All of these initiatives needto work in unison, and should be clearly articulated so thatunderwriters understand how each fits into the ultimate goal ofgrowing media accounts. Additionally, all supporting content andtools need to be consistent so underwriters arrive at the sameconclusion regardless of which resources they use.

As strategies change over time, it is critical to clarify howthese changes affect current guidelines. To continue the aboveexample, underwriters need to understand how to grow media accountswhile simultaneously limiting CAT exposure to the Californiaproperty book. Failing to clarify how both fit together may causesome underwriters to ignore the CAT exposure, and others to refuseprofitable media accounts. Clarifying how the two strategies cometogether helps underwriters know exactly where to target and whento limit.

4) Market-ready underwriting strategy

Underwriters will communicate their appetite and productsolutions to the market the same way it is communicated to theminternally. Thus, carriers need to articulate market-readystrategies to their underwriters in order to go to marketconsistently.

• Producer mindset: Carriers should focus onwhat they want to write, rather than communicating restrictions.Positive and consistent communication in both marketing andunderwriting will help producers to think of a carrier when theyreceive desired business. Since carriers want underwriters tocommunicate positively to producers, carriers need to articulatetheir strategy positively to underwriters.

• Customer mindset: Underwriters also need toexplain why a specific coverage fits the needs of differentcustomers with diverse needs. Communications should becustomer-centric. For example, if a carrier offers productionrecall, a food producer may be cost-sensitive, and value coveragethat protects them against high recall costs. On the other hand, anautomotive manufacturer may be more concerned with brand image, andvalue coverage including public and media relations in the event ofa recall. Both of these features may be part of the same coverage,but if there is no explanation of how the coverage filled differentcustomer’s needs, underwriters will not connect with each customerindividually.

Closing

By enabling flawless execution and aligning the underwritingcommunity on a common set of practices, well-defined underwritingstrategies ultimately lead to higher underwriting performance. Withclear underwriting guidelines and adequate monitoring mechanisms inplace (e.g., portfolio management, underwriting audits),underwriting leaders can more easily scale back from individualtransactions and trust that their underwriters make soundunderwriting decisions. This, in turn, improves the confidence ofindividual underwriters who better understand what needs to getdone and less frequently have to say to their producers: “I am notsure about that … let me check with my manager and I will get backto you.” Increased confidence then leads to faster decisions (easeof doing business). Producers perceive a higher degree of expertise(specialization), all of which lead to superior underwritingperformance.