1 / 35

Underwriting Risk Models: An Assessment

Underwriting Risk Models: An Assessment. Presented by Urban E. Leimkuhler, FCAS, MAAA Manager & Senior Consultant Milliman - Princeton CAS Annual Meeting – New Orleans November 10, 2003. Underwriting Assessment. Outline Underwriting Assessment -The Problem Potential Solution

marlin
Download Presentation

Underwriting Risk Models: An Assessment

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Underwriting Risk Models: An Assessment Presented by Urban E. Leimkuhler, FCAS, MAAA Manager & Senior Consultant Milliman - Princeton CAS Annual Meeting – New Orleans November 10, 2003

  2. Underwriting Assessment • Outline • Underwriting Assessment -The Problem • Potential Solution • Suggested Approach • The Process • Outcome

  3. Underwriting Assessment • Compelling Industry Need for Excellence • In Underwriting • Low interest rate environment implies higher target underwriting returns • Resulting need to maximize performance at individual risk and portfolio levels • Industry actions affecting underwriting performance and readiness • Value in institutionalizing underwriting excellence

  4. Underwriting Assessment • The Problem: • Industry failures to effectively train commercial lines • underwriters • Insufficient value attached to underwriting as a differentiator in company performance • Demise of underwriter training programs • Prolonged soft market underwriting and pricing practices • No available quick fixes

  5. Underwriting Assessment • Potential Solution: • Institutionalize profitable risk selection and management • Analyze and quantify the effectiveness of underwriting and pricing practices • Identify and target opportunities for improvement • Implement changes in processes • Monitor and measure benefits through regular check-ups

  6. Underwriting Assessment • Suggested Approach: • Evaluate specific areas for improvement • Strategies and guidelines • Information collection and management • Exposure identification / analysis underlying risk selection • Application of underwriting and pricing practices to individual risk • Monitoring tools • Benchmark and measure performance • Identify and quantify performance gaps • Report to management • Implement improvements • Benchmark performance at multiple levels

  7. Underwriting Assessment The Process • Interviews (Evaluate Process) • File Reviews (Assess Outcomes) • Reports and Graphs

  8. Underwriting Assessment • Interviews to Evaluate Process • Strategies and Guidelines • Application of Underwriting / Pricing Practices • Monitoring Tools

  9. Underwriting Assessment • Interviews to Evaluate Process • General Manager • Underwriting Manager • Underwriter • Actuary • Loss Control • Claims • Marketing

  10. Underwriting Assessment • Interviews to Evaluate Process • Strategies and Guidelines • Application of Underwriting / Pricing Practices • Monitoring Tools

  11. Underwriting Assessment • Process Interviews-Strategies and Guidelines • Strategies / plans are defined, communicated and managed • Ongoing market assessment • Pricing programs and goals • Underwriting authority • Ratemaking process / rating plan structure

  12. Underwriting Assessment • Interviews to Evaluate Process • Strategies and Guidelines • Application of Underwriting / Pricing Practices • Monitoring Tools

  13. Underwriting Assessment • Process Interviews-Underwriting / Pricing • Practices - The Underwriter • Use of Loss Control information by Underwriting • Role of Premium Audit • Familiarity with producer capabilities • Management reinforcement through behavior • Feedback loops involving Claims, Actuarial Loss Control and Underwriting

  14. Underwriting Assessment • Use of Loss Control Information by • Underwriting - Interview Questions • How effectively are Loss Control resources deployedby Underwriting? • How are Loss Control recommendations addressedby the Underwriter? • In what other ways is Loss Control asked to assistUnderwriting in ensuring effective risk selection, pricing and ongoing risk management? What otherinformation is provided?

  15. Underwriting Assessment • Process Interviews-Underwriting / Pricing • Practices - The Actuary • Formal rate reviews • Manual rate development • Actuaries / underwriters execute decisions and action plans • Actuarial role in pricing • Ratemaking data and data quality • Actuarial / operating management coordination

  16. Underwriting Assessment • Actuarial / Operating Management • Coordination - Interview Questions • What ongoing information and advice is provided by Actuary to Management? • What action plans are established - and by whom? • How effectively are these executed? • How would you characterize relationships between Actuarial and Management?

  17. Underwriting Assessment • Interviews to Evaluate Process • Strategies and Guidelines • Application of Underwriting / Pricing Practices • Monitoring Tools

  18. Underwriting Assessment • Process Interviews - Monitoring Tools • Price Monitoring • Producer Monitoring • Automated Profit / Loss Reports • Claims Metrics • Automated Production Reports • Underwriting Reviews / Audits

  19. Underwriting Assessment • Sample Interview Screen - Underwriter

  20. Underwriting Assessment • Sample Interview Screen - Underwriter

  21. Underwriting Assessment • Sample Interview Screen - Actuary

  22. Underwriting Assessment The Process • Interviews (Evaluate Process) • File Reviews (Assess Outcomes) • Reports and Graphs

  23. Underwriting Assessment • File Reviews to Assess Outcomes • Information Collection / Management • Application of Underwriting / Pricing Practices • Underwriting Decision

  24. Underwriting Assessment • File Reviews - • Information Collection / Management • Risk pre-qualification • Application / renewal questionnaire • Availability of loss experience • Loss Control reports • Access to / use of outside information

  25. Underwriting Assessment • File Reviews - Underwriting / Pricing Practices • Exposure basis • Classification assignment • Evaluation of underwriting exposures • Coverage considerations • Basis for price decision • Interaction among disciplines that support Underwriting

  26. UnderwritingAssessment • File Reviews - Underwriting Decision • Risk selection • Underwriting referral / 2nd opinion

  27. Underwriting Assessment • Sample File Review Screen - Policy-Level Data

  28. Underwriting Assessment • Sample File Review Screen - LOB Data

  29. Underwriting Assessment • Sample File Review Practices Screen

  30. Underwriting Assessment • Sample Premium Estimate Screen

  31. Underwriting Assessment The Process • Interviews (Evaluate Process) • File Reviews (Assess Outcomes) • Reports and Charts

  32. Underwriting Assessment

  33. Underwriting Assessment

  34. Underwriting Assessment

  35. Underwriting Assessment • The Outcome • Process Effectiveness Scorecard • File Effectiveness Scorecard • Needed Improvements in Performance • Recommendations • Implementation Plan • Platform for Ongoing Benchmarking

More Related