Underwriters –valued professionals acting as risk gatekeepers

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January 5, 2024

What does an underwriter do on a day to day basis? This article considers the role underwriters play, how technology plays a key part in the underwriting process, and highlights the need for underwriters to keep up with the latest technology and systems to get a competitive edge, and a boost in their career.

The jobs underwriters do day-to-day

An underwriter manages the insurance risk of the business. Each time an insurer takes on a risk, it needs a way to check that the risk is manageable. This prevents customers from selecting against the insurer – taking out a policy with knowledge of a pay-out that the insurer is unaware of. As an example, consider a property risk that is being insured in Lloyd’s. The underwriter will review the risk and determine what could go wrong. Underwriters are gatekeepers for business risk, they also set a price for the risk, and as such have an important responsibility for the company’s profit and loss. In our first of 3 blogs on underwriting, we consider the role of the hief Underwriting Officer – what they need to consider when managing an underwriting department. We consider how to set risk appetite, create an underwriting system and manage the underwriting department.

1. Setting the risk strategy and appetite

Senior underwriters work with company management and their actuaries to set risk strategies. This is based on the types of risk they are happy to accept. In the London Market, the risk decision includes how much property risk, marine/aviation risk and other smaller risk classes will be written during the year. Other insurers writing specific lines (e.g. life insurance and health) will need to consider the level of risk for their particular line of business. The limits on risks (i.e. the maximum premium that can be written) is set by Lloyd’s for their insurance syndicates and for other insurers by their capital requirements, so the risk appetite decisions are important as they determine the amount of profit that may be generated in a year. Keeping track of progress against these risk targets is critical, and that is where data and technology plays an important role. A common frustration we hear from clients is how difficult this can be if quotes issued are not tracked, and business bound (or sold) is determined late in the process. This can cost the insurer money as it writes the wrong business, or misses its premium targets. For these reasons, the value of a well-connected underwriting system (i.e. outside of the spreadsheet) cannot be underestimated.

2. Setting up the underwriting system

Underwriters are responsible for implementing a system to track underwriting decisions. This is both a company and regulatory requirement. Their system often consists of a range of different platforms which need to be connected. These systems include pricing systems like PPL and Whitespace (for Lloyd’s), pricing systems (mostly spreadsheets or for more advanced underwriters, cloud-based systems like Optalitix Quote) and policy administration systems like Guidewire, Sequel and Ndex. In Lloyd’s, most underwriters will price their business on spreadsheets. These spreadsheets are disconnected from the core underwriting systems. Keeping track of spreadsheets is effectively a system requirement, and can lead to a lot of administrative requirements and directory management.

3. Setting up and managing the underwriting team

Underwriting teams are managed by the Chief Underwriting Officer. This officer sets the risk policy, and tracks the teams’ productivity and risks accepted. The information required to do this is held in the core underwriting systems, and ideally provided as an online dashboard that can be tracked. Underwriters are incredibly valuable to the insurance process, and their experience is often a key driver of the demand for their skills. Insurance risks, especially the loss making parts, require underwriters that have seen the worst and understand how to mitigate the risk, or avoid it. Technology helps the underwriting management to understand these risks in real-time, giving them a key advantage over other insurers.Finding the right underwriters to lead a syndicate requires good knowledge of the risk area. The demand for underwriters in the current market is incredibly high due to the “hardening” (or increase) in insurance prices. It is rightly seen as a valuable profession, and those underwriters with a good understanding of innovation and technology are incredibly well-regarded. In our next underwriting blog; In the next segment on underwriting, we will consider the daily work required by the underwriter, and the impact of technology on making them more competitive, and more valuable to their employers.

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Dani Katz
Dani Katz
Founder Director

Dani’s actuarial experience and passion are key. He is a strong advocate of innovation, optimism and communication, both within the team and for the clients. Dani’s ability and experience with data ensure that we always maximise value and efficiency for every project, enabling us to unlock hidden value for the clients business.

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