Commercial insurance underwriting

Transcription

1 Commercial insurance underwriting Best practice case underwriting and portfolio management A presentation to the Turkish CUOs by David Ovenden Nov

2 Agenda Introduction The Turkish market in an international context TW best practice framework Thoughts and priorities 2

3 Introductions David Ovenden Director, RCS London Phone Mobile Chris Halliday Consultant, RCS Istanbul Phone Mobile

4 Introduction The Turkish market in an international context TW best practice framework Thoughts and priorities 4

5 Commercial lines Turkey v International International Commercial Lines Recognition of the need for greater sophistication in approach Focus on automation (and easy of trading) and improved pricing/analytical sophistication Agent distribution is a challenge, but no longer a reason to stand still Increasing interest in factoring product/market cyclicality into decisionmaking in commercial lines Significant interest in growing microcommercial/sme Commercial portfolio remediation is a common challenge Lots of talk about generic Big Data, with some smart activity Turkey Commercial Lines Large business portfolios are hurting Many years of rate reductions Some large businesses pay at or around minimum quake rates Large non-cat losses increasing in frequency Some rate increases, some of which are significant Some lines of business / individual risks attract limited capacity Risk selection is critical Interest in small and medium sectors Significant reinsurance sessions at case and portfolio level Potential for de-tariffication of quake 5

6 Introduction The Turkish market in an international context TW best practice framework Thoughts questions and priorities 6

7 Best practice underwriting PROCESS Price Delivery Sales Execution CROSS- FUNCTIONAL ENGAGEMENT Price Assessment IMPLEMENTATION & DELIVERY Product & Portfolio Management Customer & Intermediary Insight DECISION MAKING & BUSINESS MANAGEMENT CROSS- FUNCTIONAL ENGAGEMENT Risk Modelling Demand Modelling MI & Decision Support Underwriting Approach ANALYSIS Systems & Technology Tools & Techniques Internal & External Data Capability & Capacity Governance & Regulation Underwriting Strategy FOUNDATION PROCESS 7

8 Case Underwriting Best Practice Components Active Portfolio Management Decision Support, Data, MI & Communication Pricing Client Exposure Context Background Initial Acceptance Appetite Acceptance Criteria Tech Price Actual Price Condition Extensions Exclusions Deal Options Client Solutions Cover & Price options Conclusion Documentation Policy Execution Negotiate Case UW Governance Environment 8

9 Commercial framework with a market overlay PROCESS Price Delivery Sales Execution CROSS- FUNCTIONAL ENGAGEMENT Price Assessment IMPLEMENTATION & DELIVERY Product & Portfolio Management Customer & Intermediary Insight DECISION MAKING & BUSINESS MANAGEMENT CROSS- FUNCTIONAL ENGAGEMENT Risk Modelling Demand Modelling MI & Decision Support Underwriting Approach ANALYSIS Systems & Technology Tools & Techniques Internal & External Data Capability & Capacity Governance & Regulation Underwriting Strategy FOUNDATION PROCESS 9

10 Market opportunities Foundation Understanding potential data assets Foundation level roadmap for commercial pricing (post changes in quake tariff) Build data (particularly geospatial) capabilities Ensure capital plays a part in underwriting strategy, not just P&L considerations Evaluate current underwriting and pricing tools against future challenges Decision making Development of lead indicators Understanding likely future performance: Written Loss Ratios Mix indices Claims inflation Technical pricing v achieved pricing Accumulation monitoring (risk and cat) Greater use of data from surveys Analysis Develop and execute a common approach to underwriting commercial business Focus on the technical elements of property underwriting Ensure technical risk pricing sits at the heart of your processes (even if it is not possible to achieve technical pricing) Increase the amount of science in your decisions Implementation Frontline underwriters with significant technical experience Negotiation in context of portfolio performance (and potentially future performance) Technical pricing and risk selection not just risk selection An understanding of capital requirements and / or reinsurance costs Proprietary and Confidential. For Towers Watson and Towers Watson client use only.

11 Agenda Introduction The Turkish market in an international context TW best practice framework Thoughts questions and priorities 11

12 Voting Question How prepared do you feel, when thinking about removal of the quake tariff? 1. Very, prepared I have all my commercial risks geocoded and technically priced 2. I am comfortable, I know where all the risks I write a located and differentiate my fire rates to include trade, exposure to perils and quake 3. I have a plan to geocode my business and improve my technical pricing 4. I am worried about the move and feel poorly prepared at this point 5. I was not aware that changes to the quake tariff have been proposed Proprietary and Confidential. For Towers Watson and Towers Watson client use only.

13 Voting Question When do you think the quake tariff will be removed? I do not think it will change Proprietary and Confidential. For Towers Watson and Towers Watson client use only.

14 Analytical Workstreams Building a strong analytical foundation Geospatial Data It will take some time to geocode your commercial exposures, however the benefits in terms of underwriting decision support and RI purchasing will deliver a significant return on investment especially if the quake tariff is removed. Rate and exposure data Having a detailed understanding of performance at a product level is vital. Understanding the relationship between exposure and rate achieved is a minimum requirement. Industry leading retention management requires a view of technical price Claims cause codes Are you capturing the pricing and underwriting information you need when the claims are reported? A lot is spoken about big data but the best sources of underlying claims data, on which to layer external data, are you own claimants. New and retention performance Where are you winning, what trades, sectors, geographies are you competitive? Are you getting a fair share of an agents business? Do my commission and additional remuneration payments represent value for money? All simple issues, but is the data granular enough? Building a strong foundation will allow you to out-compete and remain agile 14

15 Analytical Workstreams Building a strong analytical foundation Geospatial Data Rate and exposure data Claims cause codes New and retention performance In Ireland a commercial insurer was able to It will take some time to geocode your commercial exposures, however the benefits in terms substantially of underwriting decision support and RI purchasing will deliver a significant return on investment especially if the quake tariff is removed. reduced reinsurance cost and capital loadings by Having a detailed understanding of performance at a product level is vital. Understanding providing the relationship they were between exposure and rate achieved is a minimum less requirement. flood exposed Industry leading retention management requires a view of technical price A Canadian insurer has out performed the Are you capturing the pricing and underwriting information you need when the claims are reported? market A lot is by spoken some about 3 big data but the best sources of underlying claims data, on which to layer external percentage points over data, are you own claimants. the last 5 years. Much of this outperformance Where are you winning, what trades, sectors, geographies are you competitive? Are you getting a fair has share been of an agents built business? on their Do my commission and additional remuneration ability payments to capture, represent value for money? All simple issues, but is the data granular enough? manage and analyse internal and external Building a strong foundation will allow you to out-compete and data. remain agile 15

16 Case underwriting workstream Support case underwriting decisions Rate clustering Typically, even in large developed markets the volumes of data are relatively limited, especially when you get down to trade level. However, by getting the underwriters and actuaries working together it is possible to develop board averages from which to start. Decision support In most insurance companies MI flows up the organisation. By directing MI and KPIs to the frontline to support decision making it is possible to improve the portfolio performance. Simple decision support points include; risks like these and intermediary scores Common process Adopting a common language and approach to underwriting specific products improved the agility and technical foundation of an organisation. It also allows a more learning focused audit approach. Effective licensing An effective governance environment where underwriters authorities reflect their capabilities and link back to underwriting appetites and the business plan can be a powerful driver for growth. Intermediaries prefer dealing with decision makers. Pushing the correct information to the frontline teams will improve UW outcomes 16

17 Case underwriting workstream Support case underwriting decisions Rate clustering Decision support Typically, even in large developed markets the volumes of data are In the UK, relatively limited, especially when you get down to trade level. However, by getting the underwriters segmentation and actuaries and working together it is possible to develop board averages from which to start. renewal decision support has delivered a 10% In most insurance companies MI flows up the organisation. By directing MI and KPIs to the frontline to support decision making it is possible to improve the portfolio performance. Simple decision improvement support points in include; risks like these and intermediary scores core midmarket performance. Common process Effective licensing Adopting a common language and approach to underwriting specific products improved the agility and technical foundation of an organisation. It also allows a more learning focused audit approach. Refocusing underwriting licences allowed An effective governance environment where underwriters authorities a European reflect their capabilities and link back to underwriting appetites and the business plan can be a powerful driver for growth. Intermediaries prefer dealing with decision makers. insurer to cut commercial property Pushing the correct information to the frontline teams will improve UW outcomes referrals by 1/3. 17

18 Voting Question How confident are you in the capability of your commercial underwriters given the changes and challenges that lie ahead? 1. I am the underwriting leader, and I am confident in my current teams capabilities, tools and processes to tackle the challenges ahead 2. I am the underwriting leader, and I feel my current teams will need some support to tackle the challenges ahead. 3. I am an underwriter, and I am confident in my capabilities, tools and processes to tackle the challenges ahead 4. I am an underwriter, and I feel I will need some support to tackle the challenges ahead 5. I am worried about how we will handle these threats. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.

19 Automated undewriting workstream Deploy appropriate automation Segmentation Understanding what trades and products represent suitable targets for automation is key to balance the needs of efficiency and effectiveness. Fastrack renewals It is possible to fastrack or have a low touch renewal approach for some small and medium business. Segmentation and a better understanding of technical price will allow sophisticated approaches to automatic renewal, freeing the underwriters to write new business SME products An important part of the automation process is the product development. Simple products that are well suited to the target audience with features, deductibles, assumptions and conditions that reflect the automated basis of acceptance. Identify outliers When automating new business or renewals it is important to identify outliers, risks that look weird, that perhaps an underwriter would spot. These outliers can be pushed out of the process. Balancing efficiency and effectiveness will deliver competitive advantage 19

20 Automated undewriting workstream Deploy appropriate automation Segmentation Fastrack renewals SME products A market leading European insurer was able to drive profitable growth in a competitive European market by Understanding what trades and products represent suitable targets for automation is key to balance the needs of efficiency and effectiveness. It is possible to fastrack or have a low touch renewal approach for some small and medium business. Segmentation and a better understanding of technical price will allow sophisticated repositioning approaches its Small to automatic renewal, freeing the underwriters to write new business Business products, simplifying the quotation process and An important part of the automation process is the product development. Simple products that are well improving suited to the target speed audience to with features, deductibles, assumptions and conditions that reflect the automated basis market. of acceptance. Identify outliers When automating new business or renewals it is important to identify outliers, risks that look weird, that perhaps an underwriter would spot. These outliers can be pushed out of the process. Balancing efficiency and effectiveness will deliver competitive advantage 20

21 Voting Question What is your medium term (next 2 years) ambition for automation in your commercial business? 1. I automate all my small business and use similar techniques to speed up some larger renewals. 2. I currently have all my small commercial business automated. 3. I have a well developed plan and capabilities in this areas 4. I have an ambition to automate more commercial business 5. I do not consider this to be a priority Proprietary and Confidential. For Towers Watson and Towers Watson client use only.

22 Questions Proprietary and Confidential. For Towers Watson and Towers Watson client use only.