XYZ Insurance Company's Profitable Underwriting Business Plan
Summary of this plan
This business plan and our efforts to implement it will
enable XYZ Insurance Company front-line employees (CSRs) and desk
underwriters to learn, plan, and succeed at serving their customers and
improving XYZ Insurance Company's underwriting performance* in 2006. Desk underwriters, managers, and executives
will work to support team leaders (e.g., agency and regional managers).
Team leaders will enable front-line
employees to succeed at growing our book of business profitably.
How we work our plan
We will plan our work and work our plan as a team
playbook. It should be used by
Explain principles, processes, powers, and purposes
(goals & objectives).
Develop ways to underwrite more profitably and
increase our policies-in-force
"PIF" counts while being compliant with
principles of indemnity and states' regulations.
List and describe steps used in each of our work
Illustrate how each process and its associated
principles can be used on the job to succeed.
Ask for feedback from CSRs, insureds, and former
insureds on how each process is applied so we can learn what results are
produced for our customers.
Track improvisational adjustments to our processes to
learn when variation from our formal procedures** is and is not
Scope of our plan
This plan has a limited scope.
It does not answer questions such as:
What is our lobbying strategy?
What is our pricing strategy?
How to should DOI complaints be handled?
What procedures should be used for quality
How can CSRs be trained to increase their
How should reinsurance treaties be negotiated?
These questions are not directly related to eligibility
and acceptability of applicants, exposures, etc.
is defined as growth of PIF counts and profitability as
measured by XYZ Insurance Company's loss ratio trended over the last five years.
An article explaining how team playbooks should be developed and used is on pages
61 through 63 in the Appendix.
The term procedures
is meant to indicate formalized processes used in this plan and written up in
Front-line Underwriting Guidelines
and Procedures document.
Purpose of this plan
This business plan will serve as a playbook for our
team. Use of this team playbook will
help us set goals and reach objectives in coordinated ways (e.g., our
underwriting efforts will help us achieve XYZ Insurance Company' marketing objectives,
our front-line underwriting will increase customer satisfaction and reduce
claims for undisclosed household drivers).
The principles and processes described and illustrated
here will help everyone understand each other and work together in
coordinated ways to increase XYZ Insurance Company's profitability and PIF
This is a set of documents that describe, diagram, and demonstrate a
systematic and systemic* approach to improving how XYZ Insurance Company's employees
work together to be faster, better, and cheaper than the competition.
Relationships between insureds, CSRs, desk
underwriters, and management are described in ways that facilitate building trust
and abilities. Tools and techniques
are described here to help reconcile opposing views. Principles are used in processes we have
built in ways that are aligned with our values and produce the results we
want to achieve.
We are working to make sure this plan answers the
following questions persuasively:
Will reading this plan give underwriters and
CSRs a clear understanding of what XYZ Insurance Company's Underwriting
Department is trying to achieve and why it does what it does?
Will underwriters be enthusiastic about their
Will underwriters see how their tasks
contribute to achieving your plan's goals?
Will underwriters be able to do their work so
well that they will feel satisfied with what they have accomplished each
Will the plan enable underwriters to achieve
their professional goals?
Will the plan help underwriters trust each
Will the plan help Senior Underwriters foster
open communication that is respectful of differing opinions and results in
new and better ideas?
Will the plan help underwriters hold each other accountable for
What seasonal adjustments to work schedules should be planned?
What options should be used in contingency plans?
* The word systemic
is used here to mean affecting the entire bodily system; we want to improve how
our whole system works, not just the individual parts of our organization.
We want to develop synergistic relationships
between our teammates.
Therefore, our Alexia
Roland has been asked to prepare and transmit inspirational and informational
emails each morning to our team members. See page 53 in the Appendix for the instructions we have given Alexia R.
Realism of this plan
Critics may claim
this plan requires unrealistic levels of trust and understanding by all
underwriters and front-line personnel can work together just like
construction general contractors and sub-contractors work together on building
All of our
stakeholders can participate creating win/win agreements based upon
communication of mostly objective information during and after ongoing
Therefore, vague promises will be replaced by specific
commitments with necessary details and our performance will be measured*
unpleasant surprises will be replaced by confidence, reliability, and greater
The information and
vision communicated in this playbook and the underwriters' individual
performance plans will be our sources of sanity in our crazy world.
Increased consumer confidence
in XYZ Insurance Company's insurance products, improved reliability in XYZ
Insurance Company's people and processes, along with increased underwriting
profitability will draw insureds, employees, and investors to XYZ Insurance
These qualities will also encourage
regulators to cooperate with us when we open new markets and implement
changes in existing markets.
Here are some measurements we should consider
trending of PIF counts for each agency or region
% of policies that have to be re-issued;
improvement should produce a reduction in policy re-issuances
- customer satisfaction ratings; improvement
should produce an increase in measured customer satisfaction ratings
cost per policy issued; improvement should
produce a reduction in cost per policy issued
process cycle time for fast-track
applications; improvement should produce a reduction in process cycle time for
customer retention; improvement should
produce an increase in customer retention
what percentage of your process steps and
process time add value for your customers; improvement should increase the
what percentage of
quotes are accepted by prospects; improvement should produce an increase in the
number of quotes accepted versus given
percentage or readiness of our staff to receive customer (internal and
^ See more about employee development, personal
performance, and self development plans on pages 65 and 66 in the
Implementation of this plan
As of May 11, 2005,
implementation of this plan is pending approval by XYZ Insurance Company's CEO.The following actions were initiated to
begin laying a foundation for implementation of the plan:
The Underwriting Manager began modifying his
business plan template to reflect the unique characteristics of XYZ Insurance
Company in January of '05.
One-on-one monitoring of each employee has
begun in an effort to give immediate feedback concerning what they are doing
well, learn what they want to improve, and what their weaknesses are.
A strengths, weaknesses, opportunities, and
threats "SWOT" analysis has begun*. Much
of which comes from our Compliance Officer's research, GRe-Insurance
Company's underwriting and claims audits, states' market conduct examination
reports, and DOI complaints.
Five underwriters have been invited to become
subject matter experts "SMEs" concerning one or more of their job functions
so they can inform and coach their peers during team meetings and at
Terger is our Renewal Study List SME.
Saker is our Exception Underwriting SME.
McLoud is our Risk Alerts Underwriting SME.
Mery is developing a program for diagnosing and remedying agencies' profitability
Roland is teaching an evening class enabling underwriters to work toward
achieving their employers' marketing objectives.
Terger developed an in-force underwriting process to react to insureds who
have relevant incidents in their first 60 days (our discovery period) of
Negotiations are being conducted for
resolution of complaints by CSRs against underwriters in an effort to learn
CSRs' concerns and bridge underwriters' performance gaps.
Insureds' complaints are being resolved and
used to develop case studies, as a part of the process described on the next
page, for training our team.
As problems arise and opportunities to
communicate present themselves, the Underwriting Manager is working with
teammates to develop segments of this plan.
People tend to maintain what they create; therefore, the Underwriting
Manager has worked with the team to create much of their playbook.
The team has been encouraged to create what
is relevant, realistic, and right in their minds so they can be more correct,
consistent, quick, confident, and comfortable.
This will then encourage team
members to want to use their playbook and improve it.
Our initial outline of our SWOT analysis is on page 67
in the Appendix.
Implementation of this plan (continued)
On February 14, 2005 the following process was
introduced to XYZ Insurance Company's underwriters.
They were asked to use this process to
learn what happened to cause each complaint, learn what should have happened
to assure customer satisfaction, take remedial actions as soon as possible,
and teach the team to avoid similar problems. Underwriters are asked to use the following process to take corrective
action when work is not done properly.
Research what our procedure* documentation states.
- Compare and contrast what is learned with what was done.
Briefly verify with your
peers what you are experiencing and wanting to propose.
- Take action to fix the problem and begin regaining the customer’s
Recognize what should be done to prevent the same error by other underwriters
Teach other underwriters in the next team meeting (if the issue can wait that
long) or a.s.a.p.
includes this plan, FUGAP and our
Procedures are required actions to be
performed as directed or whenever appropriate.
Guidelines are recommendations to be followed when appropriate.
Guidelines are not hard and fast rules.
Traditionally, our industry has had clerical
procedures and underwriting guidelines.
In modern times licensed CSRs (also called producers) and Customer
Service Representatives "CSRs" have computer procedures and underwriting
Procedures and guidelines
are needed to encourage accurate data entry and correct underwriting so we
avoid garbage-in/garbage-out problems, develop data integrity, and increasing
integrity by following procedures consistently permits proper rating and more
Objectives to achieve
Here are our five primary objectives.
Specific goals are described afterwards for
each objective later in this plan.
These objectives are not listed in order of their importance. Descriptions of goals and statements of
objectives will enable us to plan how to implement strategies and accomplish
Our team will create a team playbook we want
to implement, improve, and maintain as we grow in size and success.
We are a learning organization and what we
learn will be reflected in our playbook.
XYZ Insurance Company's home office
underwriting team (composed of six desk underwriters doing exception
underwriting as of November 11, 2004) and a supervisor (Dana Bourge as team leader)
will improve how it does exception underwriting and underwriting of their agencies'
books of business (see portfolio
management underwriting on pages 42 - 43).
We call these employees exception underwriters,
informally, to differentiate them from our front-line underwriters (CSRs) who
do not do exception underwriting.
XYZ Insurance Company's CSRs will improve how
they do our front-line underwriting.
Our computer system's decision-making ability
will be improved as the Underwriting Manager receives approvals for changes
from our CEO.
After our implementation of this plan has
shown at least five significant, measurable, and favorable impacts, we want
to begin renegotiating with our vendors so we secure more favorable terms and
generate more win/win agreements with regulators and firms such as our re-insurer,
GRE-INSURANCE, as well as firms who supply us with underwriting reports
(e.g., CLUEs, MVRs).
As described on page 4, our team has been asked to
develop segments of this team playbook so it can be used as a set of plans.
This will encourage them to make sure their
segments are realistic and supported by XYZ Insurance Company's management
team and other departments.
do not develop, the Underwriting Manager will introduce and explain to them
as opportunities arise so they become acquainted with the team playbook's
parts and give suggestions for improvements.
Our team will approve our playbook or improve it so it can be
implemented gradually during 2006.
Page 49 in the
Appendix has reference material indicating how goals, objectives, and
strategies fit together.
complete an application on our computer system they participate in our
front-line underwriting process.
Front-line underwriting is the work performed when CSRs gather
information, application information is evaluated by our Underwriter software,
and a decision to quote or reject is made by our computer system.
Goals to reach
Achieving the daily, weekly, and monthly goals,
described later in the report, will help us reach these goals. Our major
goals are described here in a way that parallels the objectives on the
Business plan - We will follow our plan, using
it as a team playbook.
It will be
improved in ways that enable us to support achievement of our internal
customer goals such as being available when CSRs need us and helping to
improve the quality of our front-line underwriting.
Underwriting decisions - We will standardize
how underwriting is done by employees so we are able to perform more
efficiently as our workloads increase and be more consistent in the eyes of our
This will increase how effective
we are at lowering our loss ratio.
Marketing objectives - We will monitor XYZ
Insurance Company's marketing efforts to learn how to improve our
underwriting guidelines and processes so we are more effective at increasing
our PIF counts and profitability.
Front-line underwriting -
We will facilitate improvements in how CSRs underwrite applications
Underwriter system - We will increase the
usefulness of our computer system so it makes more decisions to add more
Administrative support - We will improve how
well we work with states’ regulatory authorities and industry vendors as we
become more successful and influential.
should be S.M.A.R.T.: Specifics, not ambiguities, are used in
ways that are not subjective but are
upon by all stakeholders, with
expectations, in ways that are
with realistic deadlines and well planned timing.
Definitions of terms
The word team is used in this context to mean
all those who work at XYZ Insurance Company as CSRs and desk underwriters, as
well as their supervisors, managers, and support staff.The phrase " stakeholders" is used to mean
all parties interested in the team's efforts to issue, renew, rewrite, or
cancel policy coverages.
the process of gathering of information, analyzing relevant risk factors,
making decisions about what is relevant, and determining what actions should
be taken to manage risk.
We believe it
is a science* not an art.
is what we do when applications and renewing policies are
referred for consideration of exceptions to underwriting guidelines.Most exception underwriting is:
Performed in response to an application or
renewal being referred by customer service representatives due to
Performed in an effort to find mitigating
circumstances so an exception to formal underwriting guidelines can be
Conducted in an
effort to respond to concerns raised by formal underwriting guidelines,
building a chain of logic that informs stakeholders and persuades interested
parties to agree on a proposed action plan or make realistic counter offers.
See pages 17 and 18 for more information about
underwriting is what customer service representatives do when they
complete applications on our computer system.ront-line underwriting is the work performed when CSRs gather
information, application information is evaluated by our Underwriter software,
and a decision to quote or reject the applicant is made by our computer
is explained on pages 42 and 43.
See Our work is disciplined on pages 14 and 15.
Guidelines to follow
We are planning to improve the quality of our work. Here are our interpretations of Dr. W.
Edward Deming's 14 points for doing quality work.
These are ideals to use as guidelines and
goals while our agencies and our underwriting team plan to transition from
wherever they are to where they need to be. These can be used from initial startup to growing profitable books of
business to branching out geographically and adding lines of business.
Create a constancy of purpose.
Project a unified coordinated image during meetings, in newsletters,
in correspondence, everywhere.
a plan everyone can share.
Develop a written philosophy with guidelines all stakeholders
understand and support.
matrices, and case studies to demonstrate how work should be done.
End dependence on inspection/audits to achieve quality.
Develop best practice processes for each
job function and support their implementation thoroughly.
Adherence to good processes will produce
Stop purchasing the lowest priced supplies and services.
Minimize overall cost with an eye toward
measuring the quality of the purchase.
Where is V the highest in the value
Encourage continuous improvement of your systems and methods of
management so people's work will improve.
Institute training on the job by subject matter experts who have been
trained to develop instructional material and then facilitate learning during
Adopt and institute leadership, not traditional management.
Focus on doing the right things more than
just doing things right.
Drive out fear by increasing trust, confidence, and loyalty.
Break down barriers between staff areas and departments.
Do not use slogans, exhortations, or targets for employees.
Stop using production quotas, as required by Management by Objective "MBO".
Start measuring adherence to approved processes and customer
Give people credit for good workmanship frequently.
Stop humiliating employees with performance
Institute a vigorous program of education and self-improvement for
improving the quality of your work now.
The value formula is "V = Q/C" where V = the value of an item or
Q = customers’ estimation of quality, and
C = cost paid for an item or service by customers.
Introduction to our work
We are working to
create and maintain a comprehensive underwriting strategy* for providing XYZ
Insurance Company's insureds the best possible service and insurance
Our work will reflect
thorough analysis and strategic planning.
We will analyze each region's past:
segmentation and activity, and
legislative, and judicial climates.
Alexia Roland and
Ike Mery have been asked to create a list of questions to be submitted to our
The Associate in
Personal Insurance courses they took should help them facilitate our learning
how we can support achieving XYZ Insurance Company's marketing
Alexia began teaching the API 28 course in March. We are hoping to have one or more guest speakers
who are SMEs during classes.
We will plan our
actuary, underwriting, and marketing^ efforts,
agencies that are not profitable begin growing profitable books of business,
strong agencies to improve their performance, and
agencies whose performance has been fair but not impressive.
2004, our underwriting efforts reflected traditional paradigms applied
inconsistently. These will be relied
upon until we develop more reliable methods and use more reliable data.
Traditionally evaluation of insurance
programs' performance has been mostly subjective and focused on
"regulatory climate", "legislative climate", and
are working to help us transition from dependency on unreliable paradigms to
reliance on practices such as process mapping and principles such as logic.
used to aid our analysis of our performance include profitability,
productivity, and adherence. These are
explained on pages 24 to 25.
description of GEICO's history concerning its strategy (i.e., pricing and
eligibility) on page 77 of the Appendix.
We will be
asking questions such as: " What are XYZ Insurance Company's marketing
(advertising, sales promotions, CSR training) objectives and goals?" and " Can
the UWg team be given an update semi-annually?"
Answers to the following questions should be used to help our
underwriters learn how to help XYZ Insurance Company achieve its marketing
How should our underwriting guidelines and processes
be modified to help us achieve our marketing objectives?
What can our underwriters do to help our CSRs do their
part to achieve XYZ Insurance Company's marketing objectives?
What can our underwriters do to help agency managers
and district managers do their part to achieve XYZ Insurance Company's marketing
Essence of our work
As underwriters, our
primary work product is decisions and our main work activity is
We are considered
knowledge workers because our knowledge is the main tool we use to do our
The decision-making process, as
it applies to most types of underwriting can be summarized in five
Decide what information is needed, where it can
be found, and how to get it.
Acquire all relevant underwriting
Evaluate the underwriting information.
Know what is important for profitability and
Decide what should be done in
response to the risk's characteristics.
Look for ways to insure risks profitably.
Select and implement the best course of action
after evaluating the potential profitability of the alternative risk
management actions identified above.
Choose the best underwriting action with the best set of risk
management alternatives, communicate it to all stakeholders, and do it.
If coverage is issued or
renewed, follow up on the results of your underwriting efforts to learn how
well you worked.
Purpose of our work
The primary purpose
of all underwriting is the selecting and maintaining of a growing, profitable
book of business.
The purpose of
exception underwriting is not to find reasons to decline business.
Rather, underwriters are responsible for
"engineering" accounts in ways that will increase the likelihood
they will be profitable and thereby become acceptable risks.
(See page 11 of Pictorial's 1996
Underwriting Basics and articles
titled Engineering Exposures to
Increase Underwriting Profits in the CPCU Society's Personally
Speaking newsletters for September 2003 and March 2004 by John
Our basic work process
Underwriters who use
the following process become problem solving risk managers.
Our exception underwriters will be
encouraged to support our CSRs by acting as problem solvers when CSRs call
because the Underwriter system will not permit a quote to be given for
prospects and insureds.
This is an
extension of the five steps written on the previous page.
We are not saying all steps fit XYZ
Insurance Company's type of workload.
We are indicating we are considering this information and developing
our own processes.
1. Identify the problem area(s) described in
the applicant's/insured's documentation, on applications or on change
requests that relate to underwriting guidelines, principles, etc.
Acquire all relevant underwriting information.
Decide what information is needed, where it can be found, and how to get
Consider the following sources for
- documentation including the application,
claim reports, driving records, vehicle inspections, and notes made
concerning insureds' policies
- insurer proprietary services such as credit
scoring, judicial interpretation, and payment history
- testimony including CSR recommendations as
well as insureds' statements and commitments
- vehicle inspection(s)
2. Evaluate the underwriting information.
Know what is important for profitability
alternative risk treatments (insurance and non-insurance).
Decide what should be done in response to
the risk's characteristics.
ways to insure the risk profitably.
- determine the relative importance of the
acquired information; consider both subjective and objective information in
the context of the risk itself, the insurer's goals, and the underwriter's
- consider potential hazards (anything that increases
the chance of loss)
- classify the discovered hazards as moral,
morale, physical, or legal and react appropriately to engineer how risks may
be managed to satisfy the client and the insurer
- identify alternative risk management actions
which might be taken to modify the risk's exposure to loss (e.g.,
installation of security measures) and the insurer's policy's exposure to
claims (e.g., limiting endorsements)
- determine the proper rate(s), credit(s), and
- determine the proper insuring agreement and
Our basic work process (continued)
3. Select the best (reconciling your employer's
requirements and the prospects' or insureds' needs) set of actions from all
types of risk treatments that will produce the most acceptable results for
your employer and insureds.
Select and implement the best course of action after evaluating the
potential profitability of the alternative risk management actions identified
Choose the best underwriting
action with the best set of risk management alternatives and communicate it
to all stakeholders.
- rank alternative actions according to their
- consider the location of the client's
properties and other insureds for the same type of coverage and determine if
there is a good spread of risk
- work to add other coverage where appropriate
- consider producer pressure, regulatory
pressure, and underwriting territory goals
- make decisions promptly; develop an offer to
insure describing what would be acceptable to the underwriter or reject the
application and give supporting reasons
4. Negotiate implementation of a plan using the
actions identified above.
5. Document your explanation of the plan and
how the plan's progress should be monitored to make sure the desired results
are obtained by making notes on the insureds' files and by sending
correspondence to the insureds.
6. If all parties to the negotiations
cooperate, pursue implementation of the plan as it was negotiated using the
actions selected in step number three above.
7. Monitor our plans' progress.
Monitor implementation of underwriting
If coverage is issued or
renewed, check out the results of underwriting in the future.
Learn if underwriting of the risk was
successful or not.
If it was
successful thank those who participated and encourage all to continue to be
creative problem solvers.
If it was
not successful learn what went wrong and encourage all to work smarter in the
Our work is disciplined
Our industry has a history of what several publications
refer to as undisciplined underwriting.It is referred to as the cause of several
insurers' being unprofitable.
following quote is from Warren Buffett's underwriting principles in an old
Berkshire Hathaway annual report.
companies are judged by their cost of float*,
very few stack up as
interestingly - unlike the situation prevailing in many other industries – neither
size nor brand name determines an insurer's profitability.
Indeed, many of the biggest and best-known
companies regularly deliver mediocre results.
What counts in this business is underwriting discipline.
The winners are those that unfailingly
stick to three key principles:
They accept only those risks that they are
able to properly evaluate (staying within their circle of competence) and
that, after they have evaluated all relevant factors including remote loss
scenarios, carry the expectancy of profit. These insurers ignore market-share
considerations and are sanguine about losing business to competitors that are
offering foolish prices or policy conditions.
They limit the business they accept in a
manner that guarantees they will suffer no aggregation of losses from a
single event or from related events that will threaten their solvency. They
ceaselessly search for possible correlation among seemingly-unrelated risks.
They avoid business involving moral risk:
No matter what the rate, trying to write good contracts with bad people
doesn't work. While most policyholders and clients are honorable and ethical,
doing business with the few exceptions is usually expensive, sometimes
is defined as the amount of money an insurer pays to policyholders that exceeds
what the insurer received as premiums.
companies earn investment profits, because they have the use of the premium
money from the time they receive it until the time they need it to pay claims.
This investment money is called the float.
When the investments of float are successful,
they may earn large profits, even if the insurance company pays out in claims
every penny received as premiums. Most
insurance companies pay out more money than they receive in premiums.
The excess amount that they pay to
policyholders is the cost of float. An
insurance company will profit if they invest the money at a greater return than
their cost of float.
Our work is disciplined (continued)
According to the World Book Dictionary a discipline (a professional
practice or job) is probably a science if it is:
of human activity that is the product of a prescribed process
a set of
working principles or methods gained by education &/or training
Grammar, biology, chemistry, and physics are considered to be
A discipline is probably an
art if it is:
of human activity that is the product of and appeals primarily to the imagination
a branch of
learning that depends more on special practice than on general
a set of
working principles or methods gained by experience
Painting, drawing, sculpture, architecture, poetry, music, and dancing
are considered the "fine arts"; writing compositions, history,
literature, and philosophy are also arts.
Therefore, underwriting at
XYZ Insurance Company will be conducted as a scientific discipline.
Underwriting can be performed as a
principles are learned.
is applied in structured ways consistently to be effective and efficient.
confer with each other, whenever unusual circumstances are encountered, to
learn and work smarter in the future.
reward cooperation, compliance, and creativity.
Disciplined underwriting has the following qualities:
Our work is correct because it conforms to
fundamentally sound principles, applied accurately according to state's rules
and laws, in ways stakeholders agree upon.
We are consistent because procedures and
guidelines are implemented in structured ways.
We work cost effectively because underwriters are
able to use their time more efficiently and effectively, moving quickly with
accuracy, being certain about what is relevant and focused on what needs
We are confident because they know what to do and
when to do it.
comfortable because we are confident knowing the work we do correct,
consistent, and profitable because we are productive and not wasteful.
table lists some of the data base reports we use.
It also illustrates how our efforts to
detect, diagnose, and improve our profitability are coordinated.
Our pre-renewal underwriting process
Renewal Study List is provided by Shawn E. in our IS Dept
in increments of 15 days and worked 30 to 35 days ahead of policy renewal
date. This list includes all policies that are renewing in that time frame
that have had claim activity within the current policy period. It
includes the insured's policy number, renewal date, type of accident, loss
date, amount paid out, and the driver of the vehicle at the time of
loss. This report is computer generated. Sammy Terger
has developed the following process/procedure
for working the Pre-Renewal Analysis Report:
Using this has helped her be more correct,
consistent, quick, confident, and comfortable.
Our new business exception underwriting process
Kelly Saker was asked to
develop our new business exception underwriting procedure.
Here is a draft of her process.
We anticipate great returns on the investment we make in Kelly
and her process.
CSRs will be prompted
to ask for exceptions to our underwriting guidelines and underwriters will be
enabled to give exceptions more correctly, consistently, quickly,
confidently, and comfortably.
Examples of exceptions to underwriting guidelines
Here are some
examples of underwriters' exceptions to underwriting guidelines:
While we never intentionally agree to insure
vehicles used for pizza deliveries, we may agree to insure people who
work for pizza delivery companies. This may be done as long as the
driver is only/strictly a cook, an order taker, a manager, etc. and other
risk characteristics are mostly favorable. Documentation would be
required if the applicant or insured has given conflicting information about
the employee's job. However, if the insured is not able to provide
documentation please make a phone call to verify.
We may agree to insure someone who is
working as a home-health medical professional, if they do not transport
patients or deliver medical related materials and other risk characteristics
are mostly favorable.
# 3 -
We may agree to insure someone who has had
more than one DWI if there is not more than one alcohol or substance abuse
related conviction in the last approximately 10 years and other risk
characteristics are mostly favorable.
# 4 -
We refuse to cover named insureds who are less than
18 years of age unless they are legally married and/or emancipated and
other risk characteristics are mostly favorable. If the parent is with the
insured at the time the policy is issued go ahead and get them to sign the
application, otherwise the only paperwork they would need to sign would be
the finance agreement.
# 5 -
If an applicant wants to have Comp, Coll,
and/or UMPD on a vehicle that is over 10 years old in IL or over 12 years old
in LA and AL, we may agree to issue such coverage if new photos of the
vehicle are thorough and indicate it is in good condition and other risk
characteristics are mostly favorable. After exceeding the ages noted
above, they must have a loan and be in good condition. We will not agree if
any vehicle is 14 years or older with no exceptions.
Generally, we do not insure vehicles with a
cost new over $50,000 for Comp and Coll. However, favorable renewal
study information, a long history, a good driving record, and other factors
should be considered when a CSR or insured asks for an exception to our
guidelines. We do not want to agree to insure a vehicle that is in an
apartment complex, without security or covered parking.
Our risk alerts underwriting process
Tim McLoud and Ike Mery
developed the following procedure statement for responding to risk alerts our
department receives from Claims.
Here's the workflow process they developed for processing batches of
This document will be used by the Underwriting Manager to
train new underwriters beginning in the second quarter of 2005.
Our risk alerts underwriting decision-making process
Tim McLoud and Ike Mery
developed the following process for investigating and evaluating individual
risk alerts from Claims.
series of questions and actions they developed for processing each risk
This document will be used by the Underwriting Manager to
train new underwriters beginning in the second quarter of 2005.
Our in-force underwriting during first 60 days
Sammy Terger was asked
to develop a process for responding to losses occurring during the first 60
days (our discovery period) of new business policies.
She created the following process and began
testing it July 2005.
She may delegate
it to a Jr. Underwriter after perfecting it.
Our standard of excellence
Our desk underwriters
should be able to answer these questions with a high degree of certainty each
time they underwrite an application or renewal:
relevant questions been asked and answered about all relevant hazards?
initial information indicate the risk is likely to be acceptable?
charge an appropriate rate for the maximum potential risk?
cons out weigh the pros significantly?
account's profitability deteriorating significantly?
appropriate, will the insured accept modification of our coverage to reduce
Or will the insured
agree to take actions to reduce our risk exposure and follow through?
response to this unattractive exposure compare well with my previous
responses to similar unattractive exposures?
Am I consistent?
Our work philosophy
According to Webster's
dictionary, a philosophy is (1) a discipline comprising its core logic,
aesthetics, ethics, etc.; (2) a search for a general understanding of values
and reality; (3) the most general beliefs, concepts, and attitudes of a
This leads us to believe an
insurer's underwriting philosophy should include the insurer's:
and beliefs about insurance coverage decision making
understanding of the group's values (attitude and appetite) and perception of
beliefs, concepts, and attitudes toward all aspects of making decisions
concerning whether or not policies should be issued
This team playbook
is a statement of our underwriting philosophy.
It communicates our reasoning, expresses
our values, and explains what we think about decision making.
The essence of our philosophy is:
performed by XYZ Insurance Company's front-line and desk underwriters, will
be conducted according to our team playbook and our guidelines document.
Underwriting does not include rating,
endorsing, or compliance.
underwriting decisions will be based upon relevant factors evaluated in ways
that demonstrate our commitment to logic and fairness.
We will investigate and then evaluate
households' driving histories and vehicles' condition, maintenance, and
eligibility for the coverage requested in compliance with state
By developing a strong understanding*
of principles of insurance and marketing, exercising advanced decision-making
skills, and having a strong commitment to provide superior service to our
customers, those individuals involved in underwriting will be contributing to
the strength of XYZ Insurance Company hourly.
XYZ Insurance Company's book of business will increase in size and
profitability significantly each year.
A desk underwriter demonstrates sound understanding
when she or he can:
make decisions logically and consistently,
explain underwriting using simple terms to applicants
negotiate win/win agreements using exceptions to
underwriting guidelines appropriately,
document the essence of what he or she has done and
decided for each risk that was underwritten,
modify underwriting guidelines to improve regions’
underwriting performance as markets change.
(See John G's articles
titled Good Deductive Arguments Produce
Quality Underwriting Decisions Resulting in Increased Underwriting Profits
Parts 1 & 2 from June and August 2003 CPCU Society's TQ newsletters for
more explanations and a process.)
Here is an
organization chart reflecting what we are working to become in 2006.
As we grow in
premium volume and PIF counts, we will shift from the roles,
responsibilities, and relationships we have now and align into two areas of
The group that will be
larger and most essential to sales and service is the Sales Support
The group that will be smaller
and most essential to profitability is the Renewals Group.