![]() ![]() Great underwriters blend quantitative analysis with qualitative, forward-looking judgment about how exposures are likely to change. The main supply dynamics are other companies exiting and entering the market or adapting their own appetites, whereas the main demand dynamics include changing perils and coverage needs, evolving exposure traits, and new business models. Portfolio steering: Right place, right timeĪcross the portfolio-and within subsegments and industries-great underwriters have a clear view of the sweet spot from which they can profitably underwrite risk. Regardless of these differences, we believe that underwriting excellence has five common and essential building blocks (Exhibit 2). Beyond SME, midmarket, and large clients, many other “segments” have their own unique underwriting requirements-including programs or managing general agents, binders and delegated authority, wholesale, London markets, non-P&C coverages (political risk, surety), and industry-centric products such as environmental, construction, marine, cyber, and energy, among others. Midmarket accounts (those with premiums of $50,000 to $300,000) are often bundled to meet industry-specific needs but without the same level of bespoke customization as large accounts. As such, they require a lighter touch than large-account underwriting to be cost effective, yet they also demand more analysis and structuring than simpler SME accounts. Midmarket companies occupy a unique and sometimes confusing position between large and small accounts. Large corporate accounts have more bespoke coverage needs, so successful underwriting encompasses rigorous risk selection, creative but prudent coverage design, and limits management. For instance, SME coverage needs are relatively standard, so simplicity and automation are critical success factors. Underwriting operating models vary significantly based on industry, region, client size, and product. There is no “one size fits all” formula for success. Underwriting performance is also influenced by exogenous factors, such as the business development activities with distribution partners to generate consistent and attractive submission flow. Great underwriting cannot compensate for unfavorable conditions. It requires a comprehensive set of capabilities across hard and soft skills, qualitative judgments about future industry performance, and rigorous portfolio management to avoid markets where even When seeking to improve performance, it is important to recognize that underwriting is more than risk selection and pricing. Some insurers have a great reputation for their underwriting capabilities-as reflected in their underwriting results-while others struggle to achieve consistent quality. Making transformational investments to reinvent the role of underwriting has never been more important. ![]() ![]() Underwriting has historically been slow to change, yet clients-and the perils they face-are rapidly changing. Of course, making this shift is much easier said than done. Collectively, these building blocks and enablers are the foundation of underwriting excellence. Organizations must adapt to incorporate these technologies while also focusing on critical enablers such as distribution, culture, digital, and strategy. As technologies such as big data, advanced analytics, and artificial intelligence continue to advance and new applications emerge, each of these building blocks will evolve and become increasingly more data driven. Requires a relentless focus on five essential building blocks: portfolio steering, pricing adequacy, risk selection, capacity optimization, and coverage design. These observations have shown that underwriting excellence Over the past decade, we have witnessed both successes and shortcomings in underwriting improvement programs. Further, achieving and documenting improved results in underwriting performance can take up to several years. Risk outcomes are not binary-policy wording and exclusions might seem straightforward until they are challenged by litigation and subject to interpretation. This heterogeneity is even true in the small and medium-size enterprise (SME) category, where thousands of microsegments can each have unique risk profiles and face different hazards. Compared with retail personal lines, commercial exposures are heterogenous, intermediated, and often qualitative. Achieving underwriting improvement can be a Herculean task.
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