Study 8: Underwriting Relationships

Question 1

Underwriters should nurture good relationships with the following groups:

Answer 1

• Other Underwriters
• Reinsurers
• Brokers
• Agents
• Risk Managers
• The Claims Department
• The Actuarial Department
• The Loss Control Department
• The Legal Department

Question 2

Other Underwriters

Answer 2

• Relationship with peers is quite valuable
• Get assistance on with different lines/types of risk they are not familiar with
• Monoline vs Multiline underwriters

Question 3

Reinsurers

Answer 3

• Deciding whether to buy facultative reinsurance
• Require good relationships with reinsurers to ensure that facultative reinsurance is available when needed
• Need to build underwriting credit with them by sharing a good mix of risks (both attractive and less attractive)

Question 4

Brokers

Answer 4

• Both underwriters and brokers want to serve the best interest of the insurance buyer
• Relationship is mutually beneficial
• Makes sense to find ways to enhance and strengthen it by building a friendly rapport and scheduling the occasional in-person meeting
• Over time a better relationship leads to easier access of information on risks and more business

Question 5

Agents

Answer 5

• Similar role to the broker but only represents one insurer
• Agents can be the underwriter’s colleague in certain situations
• Working with independent agents may allow the underwriter to have access to other carriers

Question 6

Risk Management

Answer 6

Analyzing a risk to quantify the potential for losses in a specific investment and to decide what is the appropriate action to take (or whether not to take action)

Question 7

Risk Managers

Answer 7

• Risk managers represent the risk in negotiations concerning insurance
• Contextually, risk managers are underwriters’ customers
• Risk managers have in depth knowledge of the risk - it’s insurance needs, claims management, exposures to loss
• They are a critical source of information to the underwriter

Question 8

The Claims Department

Answer 8

• In the event of a loss, an insured will deal with the claims department, not the underwriting department
• Can be an invaluable source of information for the underwriter about the development of a continuing loss adjustment
• Helpful to discuss the interpretation of policy language

Question 9

Loss Reserve

Answer 9

An amount carried as a liability in an insurer’s balance sheet representing, in respect of each claim, an amount equal to the estimated final settlement cost less any amounts already paid

Question 10

The Actuarial Department

Answer 10

• Underwriters may work with actuaries to help determine the insurer’s underwriting philosophy, the competition in the marketplace, and the characteristics of each risk

Question 11

The Loss Control Department

Answer 11

• Often thought of as the eyes and ears of the underwriting department
• One of the most important sources of information about a risk and the exposure it poses for an insurer is the report from the loss control inspector
• An underwriter will find it helpful to learn from the loss control inspector in general terms about various processes and exposures

Question 12

Warranty

Answer 12

Statement or stipulation or promise in an insurance contract, the breach of which may nullify the contract

Question 13

The Legal Department

Answer 13

• The claims department is typically more likely than the underwriting department to deal with lawyers directly
• May be exceptions on large commercial accounts
• A lawyer can help an underwriter understand how policy language has been and would be interpreted by the courts in the event of a dispute with the insured

Question 14

Industry Organizations

Answer 14

• Underwriters Laboratories of Canada (ULC) is an independent, not-for-profit safety testing and certification organization
• Insurance Bureau of Canada (IBC), an organization engaged in working with the federal, provincial, and territorial governments on the legislative framework within which property and casualty insurance is practiced
• SCM Risk Management Services provides risk information, loss prevention and control services, commercial inspections, actuarial and other specialized risk management, and insurance consulting services
• The Insurance Institute of Canada (IIC) is the premier source of professional education and career development for the country’s property and casualty insurance industry.