Underwriting Fundamentals
What is: To make money (for their carrier), by evaluating prospective risks and correctly judging adequate premiums.
This report lets us see a client's claims history over a set period of time, including information on claims dollars paid to date, reserved dollars to date on open claims, and details about each claim.
What are loss runs?
This term refers to the types of risks/exposures that the insurance company has provided as target markets for their underwriters to pursue
What is appetite/carrier appetite?
This term refers to anything an underwriter may require in addition to a bind request as a contingency for coverage to be bound.
What are subjectivities?
This figure is something we give underwriters when negotiating price, which more often results in our desired outcome than simply asking for a reduction.
What is target price/target rate?
These positions at the insurance company mirror our AM and AE/Producer dynamic.
What are processors/underwriting assistants and underwriters?
This rating factor is created by the NCCI, which carriers in participating states utilize as a factor that directly increases or decreases the manual premium. The factor represents how the business's actual claims stack against its peers for the rating period.
What is an x-mod/experience mod factor?
The number of days' written notice a carrier must provide to the insured and agent prior to reductions, material changes, or increases in premium exceeding 29.9% in the state of Illinois.
What is 60 days' notice?
Underwriters often require this prior to quoting in order to gain more in-depth information about a specific risk beyond what is provided in the Acords.
What is an application/supplemental/supplemental application?
These are the three main divisions many insurance companies use to divide accounts by premium size.
What are Small Business, Middle Market, and Large Business?
The basic information an underwriter will need on a new submission.
What are acord applications and loss runs?
This ratio/formula is the basic way in which underwriters evaluate a policy's performance, in terms of premiums collected vs claims paid.
What is a loss ratio %?
(Claims Paid รท Premiums Collected = Loss Ratio)
Underwriters must ensure that policies comply with these, which vary by state and include rules on filings, disclosures, and financial audits.
What are statutory requirements or state insurance regulations?
Something an underwriter may order in order to have an in-person evaluation of a risk they are insuring.
What is a loss control inspection?
This knowledge we hold on competing carriers helps inform us of when we accept what a carrier is doing, versus when we push back. The general term we use to refer to a particular risk and the types of carriers who insure it.
What is marketplace knowledge?
Underwriters often use this classification system to group businesses by type and risk level.
What is SIC or NAICS code, or what are class codes?
These two metrics are the main ways in which underwriters evaluate the total number of claims and the total claims dollars paid across all those claims.
What are frequency & severity?
These types of mandates are insurance company-wide requirements impressed upon underwriters that must followed by without exception.
What are underwriting guidelines/restrictions/home-office requirements?
These may be added to policies in response to loss control inspections/supplemental applications as a means for the underwriter to restrict coverage or avoid insuring a particular part of a risk.
What are limitations/exclusions?
These factors are things we point to, when in our favor, to negotiate for favorable pricing and terms. At least two named.
What are loss history, years with the same company, prior year rate + deductible changes, market trends, competition (insured getting other quotes), decisions the UW has made on similar accounts?
Who at IRM you should go to if you have issues with an UW, and who that IRM teammate might go to at the insurance carrier.
Who is Marketing Rep (Luke Hunter) and the underwriting manager?
This percentage is where carriers "break even" on profitability for a policy. The remaining % would go to their overhead and expenses, so if this percentage is paid to claims, the carrier would make 0%.
What is 60-65%?
This is an internal document provided by the insurance company for which they work which informs underwriters of their authority including class codes, premium size, situational discretion, and higher-up referral requirements.
What is the underwriting manual?
This provision may be required on property insurance, which makes coverage contingent upon the required mechanism being present and operational. If the mechanism was not in-place, coverage could be denied in the event of a claim.
What are protective safeguards?
These are some Noah recommended approaches to building a relationship with an underwriter and working them in renewal negotations.
What are:
- having phone calls vs emails
- asking questions, asking them to help us understand decisions they are making or stances they are taking
- providing alternate perspectives
- providing clear needs and outcomes (i.e. if you get the pricing to x, we can get this wrapped up)
- empathizing with their situation (we get you're in a tough spot and you need to take some rate here)