An underwriter's view
“Underwriters have for year’s underwritten client’s risks based on the data provided. Engagement around renewal and claims has been refined over time and therefore many in the large account space see the Insurance Act as business as usual, ” according to Brian Kirwan of Allianz Global Corporate & Specialty. However, ‘ he continues’ subtle changes driven by the Act, should significantly improve the nature of engagement in the industry creating much more understanding between the parties on how each views the risk.
His underwriters and claims managers are getting ready to conduct things differently under the new legal framework, and he believes that buyers will want to do so as well.
Overall, he is confident the Act will work to the buyer’s benefit as it removes the draconian powers available to insurers to void claims for reasons not directly associated with the claim. In practice, he says, companies like his that focus on the larger clients would not exploit these powers as doing so would destroy their reputation. Nonetheless, the Insurance Act brings a peace of mind that was previously missing.
There remain, though, a lot of grey areas and questions to be answered. Kirwan hopes that Airmic, will continue to take a market lead, especially in driving a consistent approach to both underwriting and claims. That way there is greater chance of agreement and consistency on key questions. For example, what is material in relation to premium calculation? How will proportionality work in practice when paying large claims? How do customers bring information to market that is sufficient without being over-burdensome, and also clearly presented? Will all insurance companies have similar definitions of relevant information?
He thinks it likely that the Act will change the interaction between underwriters, brokers and customers alike. “Underwriters naturally keep a record of meetings but may need more clarity on how they use the information. How did this information affect my view of the risk? How did I make my pricing or underwriting decisions using this information? Is this consistent with my view on similar risks? In lines such as property where information is often put in catastrophe models the impact of certain information may be easy to demonstrate but in other lines it may not be. I see a potential increase in bureaucracy if we as an industry do not execute effectively in this environment,” he says.
Given the extra amount of records required and the time involved, he believes buyers with multiple insurers on their risks will have to re-evaluate how they brief the market. Do they have a series of meetings with individual underwriters or one session with all of them? Subject to data security issues one idea worth considering is to put the relevant facts and answer questions on a secure web platform with access for all stakeholders, including participating brokers and insurers.
Underwriters focus on key questions such as their “impression of a customer as a well-run, well risk managed, long-term partner”; but will need to back this up with data and key metrics showing how they evaluate these aspects in the pricing process. These are, of course, questions that should be asked anyhow, but he believes that the Act’s focus on greater professionalism and accountability will encourage discipline.
The way claims are handled will also change, especially around the question of proportionality, he says. And he suspects there may be more industry discussion on claims – “more negotiation around the edges” – when the ‘nuclear option’ of refusing them altogether is removed.
The changes may be subtle, but have the potential to develop into a culture change, with improved understanding between insurers and their customers. And he supports the view, often expressed by Airmic, that risk managers should allow more time for their renewals once the Act is in force. Doing so will advance clarity and certainty of cover - objectives that lie at the heart of this legislation.
Brian Kirwan