Commercial motor risk selection & pricing Flashcards
What is the ASU?
Allianz Standard of UNderwriting.
Which is a set of rules
and principles set out by the Allianz Group to govern all
operating entities (e.g. Allianz UK) for non-life insurance
business.
What is the purpose of the ASU?
The purpose of this is to protect the capital base of
Allianz Group at both a local and global level by
focusing on underwriting sustainable and profitable
business, securing consistency, aligning Group and local
risk appetites and avoiding undesired and/or excessive
risks with significant accumulation.
What is the motor market strategy?
Our strategy is to sustain the profitability of the account
through the market cycle by continuing the strong
underwriting and portfolio management disciplines in
accordancewith our segmentation policy, risk quality
and pricing strength, whilst capitalising on opportunities
to grow our core business.
What are the good habits - Which have enabled Alllianz to build a profitable commerical motor portolio?
- Careful and sensible risk segmentation and selection,
targeting risk averse clients and low hazard classes; - Pricing to target loss ratios and comparing characteristics
to account average benchmarks for the risk type; - Achieving target rate change and technical pricing in line
with Plan objectives; - Applying minimum rates per vehicle to achieve adequate
large loss provision; - Constantly monitoring and managing portfolio
performance and the effects of the pricing strategy; - Predicting and managing future performance around
a set of meaningful and measurable Key Performance
Indicators; - The use of account data and characteristics of
homogenous exposuresto underwrite and price
business, not just ‘burning cost’; - Working with and developing a team of Senior
Underwriters in head office and the trading regions to
run the business; - Specialist training, complimented by the delegation of
appropriate authorityto the underwriters; - Confidence! Holding our nerve and constantly testing
the market for scope toexceed our corporate plan
objectives.
What is the percieved benefit of Core risks?
And why does it comperise a higher % of our account?
Core risks have a lower perceived large loss potential
per unit of exposure.
We can therefore regard its performance as more stable and predictable.
Consequently, we believe that core business is more
likely to deliver a sustained profitable result for
us, provided our pricing is sufficient to account for
attritional costs and there is adequate allowance for
large loss across the account.
What is the vehicle exporese ratio being core, and non core?
WIll this translate to a similar proportion of the account GWP?
On an account-wide basis our current strategy is to establish and
maintain a vehicle exposure ratio of 10% non-core to 90%
core business.
The proportion of premium on our book will
not match these proportions as the average premium per
vehicle for non-core business is much higher than for core on
account of the different risk exposures.
Why do we write non-core business?
- We are a major player in the Commercial Motor
Fleet market and this can enable us to use our
influence on this market to develop our overall
commercial business. Writing a broad base of
business will enable us to do this. - The ability to accommodate non-core business can
provide leverage to obtain core business or nonmotor business. - We have a historical book of non-core business,
which provides a contribution to our account and
helps to fund our expenses.
What constitutes a normal risk?
1) has been established for at least three years, and an
up-to-date confirmed experience from the previous
Insurer(s) has been obtained. Proof of NCD for No
claims discount rated risks must be obtained, plus
details of all claims over the past three years.
2) has not expanded rapidly by organic growth or takeover
3) has not changed Insurer each year.
4) has not got a high proportion of young drivers
(under 25 years of age) or drivers with an accident or
conviction history.
Drivers with a poor accident records may indicate a
careless attitude, inadequate training to drive the
vehicle(s) involved, or disinterest in the job that they
are doing.
Drivers with a poor record of motoring convictions
are likely to be less attractive risks.
None of these are favourable features, so risks
displaying them should be generally avoided.
5) Is not listed below under “Risks that require special
consideration” or “Risks that are not normally
acceptable”.
The information provided within the Broker
presentation should indicate the Insured’s trade or
occupation.
Why is classical cars unsuitable for a commerical motor policy?
They are unsuitable for a Commercial Motor policy
as indemnity under our policy is based on market
value or declared value whichever is the less.
These types of vehicles need professional valuation and
agreed value policies, which form a specialist area
of underwriting. It can also be difficult and therefore
costly to find replacement parts for these vehicles.
Why are motorcycles not normal accpeted?
A motor policy dominated by
motorcycles is likely to be either a pizza delivery
company or a courier risk; both are equally
undesirable for similar reasons. They are likely to
have a high proportion of young drivers and/or high
driver turnover. Motorcycles are also used for this
type of business as they can weave in and out of
traffic and can be used for express delivery.
Why are care transporters no normally accepted?
These are bulky and difficult
to manoeuvre, particularly the double decker
articulated variety. Their size increases the risk of
damage to immobile property. A risk with a number
of these vehicles is more likely to be a Motor Trade
risk and therefore is unsuited to our Commercial
Motor contracts.
Why aer three wheeled vehicles not normally accepted?
These are less stable than
four-wheeled vehicles and rarely operate as company
vehicles
Why are Emergency Service vehicles (Ambulance, Fire Brigade and Police). not normally accepted?
These vehicles may be used in
high speed emergency situations. However, aside
from this aspect, these risks may be subject to an
annual tendering process and renewal negotiation
can be difficult.
Why are Sercurity, Surveillance and Vehicle Recovery not normally accepted?
These may attract reprisal
attacks involving arson, malicious damage or theft
incidents. We should generally avoid becoming
involved in providing cover for these types of risk – if
cover must be provided then we must have adequate
rates and terms to reflect this exposure and we
should seek to avoid offering cover on the vehicles
seized.
Why are Ice cream Vans and Mobile shops not normally accpeted?
Both types of vehicle may present an increased personal injury
exposure relating to the operating area and the
attracting of pedestrians to the vehicle. The vehicles
may be susceptible to theft attacks and petty
vandalism. Fish and chip, and kebab vendors are
particularly unattractive risks due to the additional
fire hazard presented by cooking being carried out in
the vehicle.
Why are Scrap Metal Merchants not normally accepted?
This occupation frequently
involves the use of skip vehicles for collection.
This may be associated with problems relating to
unstable loads and the carriage of goods that are
inadequately secured.
Why are Demoliaition Contracotrs not normally accpeted?
There are increased hazards
associated with the loading and unloading of the
vehicles together with the enhanced damage risk
associated with the areas in which they work. There
may also be problems relating to the stability of the
loads carried. In some circumstances the vehicle will
also carry explosives which would naturally carry
additional exposure
Why are sewerage/ Drain Cleaning risks and waste disposal not noramlly accpeted?
Sewerage/Drain Cleaning risks and Waste Disposal.
The substances carried may be noxious or toxic, and
are often carried in tankers. Rupturing or overturning
of the tanker in an accident may lead to a pollution
claim or possible third party injury if the contents
are sprayed over vehicles. Waste disposal risks may
operate in hazardous areas such as landfill sites or
public waste disposal sites. Waste disposal risks can
also suffer the same problems with load stability as
demolition contractors
Why are Quarry Operators not normally accepted?
There is an enhanced risk of
accidental damage to vehicles associated with use
in quarries, especially if blasting takes place or the
vehicles are digging below their own wheelbase.
Site security may be limited, creating increased theft
exposure.
Why are Risks involving the carriage of hazardous goods not normally accepted?
Even a minor accident could result in a major
catastrophe loss.
Why are vehicle Movement risks, such as Car Valet Parking - not normally accepted?
This is where a chauffeur is employed
by an often exclusive club, to park members’
vehicles for them. Such risks can involve high value
vehicles and may involve difficult manoeuvring of
the vehicles in cramped spaces. We will have no
control over the numbers or types of vehicles being
moved. Risks should only be considered where we
have a significant P&C connection such as a hotel.
Why are Continental transports not noramlly accpeted?
Losses which occur
involving UK vehicles abroad are generally more
expensive to settle and often defending non-fault
incidents proves to be more difficult.
Why are street traders not normally accepeted?q
They tend to have an increased
pedestrian exposure due to operating in and
around town centres
Why is are buses and coaches a risk that require special consideration?
Buses and Coaches used for hire and reward.
Bus and Coach business involves above average
potential for large third party bodily injury claims due
to the passenger accumulation exposure. Vehicle
values can also be very high and high mileage
may be undertaken. Due to these risk features we
no longer offer a Bus and Coach product or write
these cases at new business. We do however have a
handful of legacy cases across the UK.
Why are self drive hire risks that require special consideration?
When underwriting Self
Drive Hire, we are very dependent on the level of
selection employed by the operator when hiring
vehicles as we have no control over the drivers.
Another common problem with this type of business
is that claims can go unreported for some time if the
driver is untraceable at the time of the accident. If
the vehicles are covered whilst off hire we also need
to understand whether the client’s premises are in a
flood zone or a high crime area
Why are Carriage of goods for hire and reward a risk which requires special consideration?
These risks are usually unattractive
to us as they are often associated with high
accident frequency on account of high utilisation
and the pressures of tight timed deliveries in urban
locations. Driver turnover may also be high limiting
the benefit of driver training. If the vehicles used are
less than 7.5 tonnes there may be a bias towards
drivers without HGV driving licence entitlement.
Why are all vehicles over 16t GVW including tippers a risk which require special consideration?
Such vehicles are associated with above average
large loss potential. They are also more difficult to
manoeuvre, travel on uneven ground and often
involve very high annual mileage and utilisation.
Why are risks with a high percentage of Agency drivers a risk which require special consideraion?
Risks with a high percentage use of Agency Drivers.
Many road-based industries are suffering from a
shortage of skilled drivers as a consequence of low
wages and long hours associated with these trades.
It is a particular problem in the haulage industry
where many operators resort to using agency
drivers despite the perception that they may not
be as loyal, professional or as skilled as their own
drivers.
