Study 8: Underwriting Relationships - Summary Flashcards
1
Q
The benefits of good relationships with other insurance professionals
A
- Most important benefit of good relationships is the dissemination of information they make possible - access to information they need makes underwriters’ jobs easier
- Building trust between underwriters and other insurance professionals helps to attract and retain profitable business
- Underwriting involves negotiating terms, and any negotiation carries the potential for dispute and damage to goodwill. Good relationships lower that risk
2
Q
Underwriters should always behave professionally when interacting with others, by demonstrating the following behaviours
A
- Avoid potential conflicts of interest and keep transactions at a professional level (parties are independent and do not have a personal relationship)
- Comply with applicable codes of conduct and uphold fiduciary responsibilities to customers
- Maintain confidentiality and privacy of information
- Respect different approaches and opinions toward underwriting and other components of the insurance policy life cycle
- Demonstrate professionalism, courtesy, and respect when dealing with others
3
Q
Underwriters should nurture good relationships with the following groups of insurance professionals
A
- Other underwriters
- Reinsurers
- Brokers
- Agents
- Risk managers
- The claims department
- The actuarial department
- The loss control department
- The legal department
4
Q
Other underwriters
(Underwriter relationships)
A
- Highly valuable, especially when consulting about risks they may not be as experienced or familiar with
- Underwriters may be divided into separate departments with different specialities, jurisdictions, or lines of insurance
5
Q
Underwriters may seek the following information from their counterparts in other branches
A
- the operations of the risk in those other territories;
- the law in those jurisdictions;
- environmental considerations;
- the business climate; or
- any other feature of the risk and its local circumstances that might be relevant to an underwriter’s assessment of the risk.
6
Q
Monoline underwriters and multi-line underwriters
A
- Multi-line underwriters: responsible for all or many lines of insurance for each of the insurer’s accounts
- Monoline underwriters: responsible for a single line of insurance for each of the insurer’s accounts
- Some lines of insurance are more likely to be written by monoline underwriters (ex. equipment breakdown is highly specialized and often underwritten by those with expertise in that line)
7
Q
Reinsurers
(Underwriter relationships)
A
- Underwriters must have good relationships with facultative reinsurers so that facultative reinsurance will be available when needed
- To develop such relationships, they must establish underwriting credit (demonstrate a thorough knowledge of each risk and the underwriting exposure it represents)
- Sharing a mix of risks with the reinsurer, including more and less attractive risks, creates a greater chance the reinsurer will earn a profit over time
8
Q
Underwriters may need facultative reinsurance for unique or especially hazardous exposures. These may include
A
- hazardous occupancies, such as chemical manufacturing or furniture-making;
- risks located in areas unprotected by municipal water supplies or fire departments;
- risks with the potential to suffer catastrophic loss, such as a large schedule of properties in the earthquake-prone lower mainland of British Columbia;
- risks that sell their products in the United States, where many insurers fear the loss potential posed by a more litigious culture;
- liability risks with the potential for “long-tail” liability losses, such as pharmaceutical production; and
- risks with high values.
9
Q
Brokers
(Underwriter relationships)
A
- Brokers need to work with underwriters to secure a market for insurance, and underwriters need to work with the brokers to secure opportunity to provide insurance that will generate premium income for the insurer
- Meetings between underwriters and the broker sales manager can be productive to establish relationships, discuss appetite, preferred risks, submissions, applications, workflows and common issues
- Relationships can be tense since brokers approach multiple underwriters and choose the best quote. Underwriters must not let this natural tension affect the relationship
10
Q
Agents
(Underwriter relationships)
A
- Agents represent only one insurer. The underwriter’s relationship with them is more similar to that of a co-worker than an outside vendor (i.e. a broker)
- Since agents have no alternative market, the underwriter must be more sensitive to their interests and circumstances regarding a prospective insured
11
Q
Risk managers
(Underwriter relationships)
A
- Risk managers represent the risk in negotiations concerning insurance, making them the underwriters’ customers
- The knowledge a risk manager has of the operation (ex. insurance needs, claims management, exposure to loss) will be far greater than the underwriter’s, making them a critical source of information
12
Q
The claims department
(Underwriter relationships)
A
- Claims departments can be an invaluable source of information for the underwriter about the development of a loss adjustment, since they deal directly with the insured
- Through good relations with the claims department, the underwriter may learn of changes in legal jurisdiction and of newly released judgments that will affect the underwriter’s future assessment of risks like those involved in such cases
- The loss experience for a risk can help the underwriter in estimating the likely future development of incurred losses
- Claims adjusters also have the most expertise in the interpretation of policy language since they determine whether insureds are entitled to recover their loss
13
Q
The actuarial department
(Underwriter relationships)
A
- Actuaries do the ratemaking that underwriters then modify according to the insurer’s underwriting philosophy, the competition in the marketplace, and the characteristics of each risk
- Actuaries may help determine the insurer’s philosophy
14
Q
The loss control department
(Underwriter relationships)
A
- The “eyes and ears” of the underwriting department, they provide information about a risk and the exposures it poses for the insurer
- Underwriters rarely visit a risk in person, and will rely on the loss control report for info about it
- Underwriters may encounter risks with specialized or technical operations they are unfamiliar with. The loss control department can help them learn about the risk and thus properly assess the exposure it represents
15
Q
The legal department
(Underwriter relationships)
A
- Underwriters working on large commercial accounts may need to work with lawyers directly, or if they encounter lawyers during a large claim
- Relationships with lawyers may be a valuable supplementary resource since they can take the temperature of the court (i.e. understand how policy language would be interpreted by the courts if the event of a dispute)
