Interaction with Underwriters
Casualty Actuarial Society
Spring Meeting - May 17, 2005
Brian Evans CPCU, ARe
Vice President & UW Manager
GE Insurance Solutions
John Herder, FCAS, MAAA
Sr. Pricing Actuary
GE Insurance Solutions
CAS 2005 Spring Meeting – Interaction with Underwriters
Introduction to E&S (non-admitted) Market
– Free of Rate Filing Requirements
– Free of Form Filing Requirement
– Account typically must get 3 rejections from standard
markets before accessing the non-admitted market
– Surplus Lines Brokers
– Multiple Levels of Intermediaries possible
– No Premium Tax (Surplus Lines Tax paid by Broker)
– Commission Negotiable
2/
GE Insurance Solutions
May 17, 2005
CAS 2005 Spring Meeting – Interaction with Underwriters
Business Overview -- First Specialty Insurance Corp.
Excess & Surplus Lines
– $100MM operation
– Casualty Business (CGL, Umbrella, FF XS)
– Risks consist of:
–
–
–
–
Manufacturers
Contractors
Restaurants
Distributors
-
Habitational
Commercial Real Estate
Service Businesses
Amusement Parks
– Large Account Deal Business
– Minimum Premium is $50k for Primary, $15k for Excess
– All UW’s on Staff have more than 20 years industry
experience.
3/
GE Insurance Solutions
May 17, 2005
CAS 2005 Spring Meeting – Interaction with Underwriters
U/W Process
– Broker submission
– U/W Evaluates Exposure
– U/W aligns Terms & Conditions to be offered for exposure
considered acceptable
– U/W calculates “Benchmark Premium” using Pricing Models
& decides Premium to Quote
– Authority Level
– Within Authority, U/W can Quote
– Outside Authority, referred for approval
– Approval from U/W Management
– Generally requires Actuarial approval
4/
GE Insurance Solutions
May 17, 2005
CAS 2005 Spring Meeting – Interaction with Underwriters
History / First Steps
– 2001 & 02
– Hard Market, 400% Growth of book in 2 years
– Unclear U/W Focus, Inconsistent Pricing, Minimal Metrics to manage
book
– Adverse results of the Soft Market beginning to surface
– Spring 2003 – Brian & John brought in
– Established U/W Strike Zone
– Developed of Excel based rating tools
– Began to Capture information on Benchmark Pricing, Quote
Timeliness, Premium per Exposure
– Created Standard Reports to monitor the book
5/
GE Insurance Solutions
May 17, 2005
CAS 2005 Spring Meeting – Interaction with Underwriters
Present / Next Steps
– 2004 & 05
– Revise & Fine Tune U/W Guides
– Improvements in Processes: Processing of Quotes & Policy Issuance,
Loss Control, Premium Audit, Claims Audit, Communications
– Enhance Excel based rating tools (Accuracy of Pricing, Ease of Use,
Coordination with Marketing Strategy)
– 2005 & 06
– Develop & Migrate to Centralized web-based Workflow and Rating
Tool
– Develop on-line, on-demand reports
– Avoid Soft Market Pricing & Underwriting mistakes of the past
6/
GE Insurance Solutions
May 17, 2005
CAS 2005 Spring Meeting – Interaction with Underwriters
Actuary’s Perspective: Why Should Pricing Actuaries
want to Spend Time with UW’s?
– They are our “customers”
– They bring income into our organizations whereas we are overhead
expenses.
– Their day-to-day decisions generate our companies’ future results.
– Our job is to help them do their job better (faster, more focused,
more accurately, more disciplined … better)
– They can help us do our jobs better
– They have a much deeper “hands on” understanding of the business
than we do.
– Real-world practicality to our models.
– Identifying missing variables.
– Together we can deliver better results than either of us
alone can.
7/
GE Insurance Solutions
May 17, 2005
CAS 2005 Spring Meeting – Interaction with Underwriters
Underwriter’s Perspective: Why Should UW’s want to
Spend Time With Actuaries?
– They can help us understand our business better:
– Understand Trend
– Learn the Mechanics of Loss Development
– They can help us produce better results:
– Development of Adequate Pricing
– Metrics for better business management
– They Provide a “Pricing Conscience”
– Together we can deliver better results than either of us
alone can.
8/
GE Insurance Solutions
May 17, 2005
CAS 2005 Spring Meeting – Interaction with Underwriters
Underwriter’s Perspective: What should I do to make
the Actuarial Process better?
– Think of the actuary as a teammate
– Provide input to the actuary
– Accept input from the actuary
– Think of the pricing models as helpful tools rather than
roadblocks to writing business
– Be willing to learn the theory of how the models get to an answer
– Ask if not sure of how to use the tools
– Help identify where & when the pricing models work / don’t work in
the real world:
– ID where/when the answer is unexpected (high or low)
– ID where/when the gap between related quotes is wider or not
as wide as expected
– Feedback
– Praise when justified
– Suggestions for improvement when justified
9/
GE Insurance Solutions
May 17, 2005
CAS 2005 Spring Meeting – Interaction with Underwriters
Actuary’s Perspective: What should I do to make the
Underwriting Process better?
– Be a member of the team
– Build Tools to help the Underwriters to do their job better
– Faster & easier not just more precise
– Training
– On use of tools
– Actuary 101 Classes
– Price Individual Deals (upfront assistance, not just referrals)
– Monitor & Report out results
– Timely
– Interpret what I see, not just report it
– Offer praise when justified & suggestions for improvement when
justified
10 /
GE Insurance Solutions
May 17, 2005
CAS 2005 Spring Meeting – Interaction with Underwriters
Working Together = Business Success
– Joint creation of UW Strike Zone
– Consistent Benchmark Pricing
– Rate Adequacy Research
– Metrics for Managing the UW Staff
– Portfolio Management Tools
– Together, we accomplish better results
11 /
GE Insurance Solutions
May 17, 2005
CAS 2005 Spring Meeting – Interaction with Underwriters
Audience Participation Time
Examples of when the Actuary / UW relationship :
– was less than ideal
– worked great
12 /
GE Insurance Solutions
May 17, 2005