Interaction with Underwriters Casualty Actuarial Society Spring Meeting - May 17, 2005 Brian Evans CPCU, ARe Vice President & UW Manager GE Insurance Solutions.

Interaction with UnderwritersCasualty Actuarial SocietySpring Meeting - May 17, 2005

Brian Evans CPCU, AReVice President & UW ManagerGE Insurance Solutions

John Herder, FCAS, MAAASr. Pricing ActuaryGE Insurance Solutions

2 /GE Insurance Solutions

May 17, 2005

Introduction to E&S (non-admitted) Market– Free of Rate Filing Requirements

– Free of Form Filing Requirement

– Account typically must get 3 rejections from standard markets before accessing the non-admitted market

– Surplus Lines Brokers– Multiple Levels of Intermediaries possible– No Premium Tax (Surplus Lines Tax paid by Broker)– Commission Negotiable

CAS 2005 Spring Meeting – Interaction with Underwriters

3 /GE Insurance Solutions

May 17, 2005

CAS 2005 Spring Meeting – Interaction with Underwriters

Business Overview -- First Specialty Insurance Corp. Excess & Surplus Lines

– $100MM operation– Casualty Business (CGL, Umbrella, FF XS)– Risks consist of:

– Manufacturers - Habitational– Contractors - Commercial Real Estate – Restaurants - Service Businesses– Distributors - Amusement Parks

– Large Account Deal Business– Minimum Premium is $50k for Primary, $15k for Excess

– All UW’s on Staff have more than 20 years industry experience.

4 /GE Insurance Solutions

May 17, 2005

U/W Process– Broker submission– U/W Evaluates Exposure– U/W aligns Terms & Conditions to be offered for

exposure considered acceptable– U/W calculates “Benchmark Premium” using

Pricing Models & decides Premium to Quote– Authority Level

– Within Authority, U/W can Quote– Outside Authority, referred for approval

– Approval from U/W Management– Generally requires Actuarial approval

CAS 2005 Spring Meeting – Interaction with Underwriters

5 /GE Insurance Solutions

May 17, 2005

History / First Steps– 2001 & 02

– Hard Market, 400% Growth of book in 2 years– Unclear U/W Focus, Inconsistent Pricing, Minimal Metrics

to manage book– Adverse results of the Soft Market beginning to surface

– Spring 2003 – Brian & John brought in– Established U/W Strike Zone– Developed of Excel based rating tools– Began to Capture information on Benchmark Pricing,

Quote Timeliness, Premium per Exposure– Created Standard Reports to monitor the book

CAS 2005 Spring Meeting – Interaction with Underwriters

6 /GE Insurance Solutions

May 17, 2005

Present / Next Steps– 2004 & 05

– Revise & Fine Tune U/W Guides– Improvements in Processes: Processing of Quotes &

Policy Issuance, Loss Control, Premium Audit, Claims Audit, Communications

– Enhance Excel based rating tools (Accuracy of Pricing, Ease of Use, Coordination with Marketing Strategy)

– 2005 & 06– Develop & Migrate to Centralized web-based Workflow

and Rating Tool– Develop on-line, on-demand reports– Avoid Soft Market Pricing & Underwriting mistakes of the

past

CAS 2005 Spring Meeting – Interaction with Underwriters

7 /GE Insurance Solutions

May 17, 2005

Actuary’s Perspective: Why Should Pricing Actuaries want to Spend Time with UW’s?– They are our “customers”

– They bring income into our organizations whereas we are overhead expenses.

– Their day-to-day decisions generate our companies’ future results.

– Our job is to help them do their job better (faster, more focused, more accurately, more disciplined … better)

– They can help us do our jobs better– They have a much deeper “hands on” understanding of

the business than we do.– Real-world practicality to our models.– Identifying missing variables.

– Together we can deliver better results than either of us alone can.

CAS 2005 Spring Meeting – Interaction with Underwriters

8 /GE Insurance Solutions

May 17, 2005

Underwriter’s Perspective: Why Should UW’s want to Spend Time With Actuaries?– They can help us understand our business better:

– Understand Trend– Learn the Mechanics of Loss Development

– They can help us produce better results:– Development of Adequate Pricing – Metrics for better business management– They Provide a “Pricing Conscience”

– Together we can deliver better results than either of us alone can.

CAS 2005 Spring Meeting – Interaction with Underwriters

9 /GE Insurance Solutions

May 17, 2005

Underwriter’s Perspective: What should I do to make the Actuarial Process better?– Think of the actuary as a teammate

– Provide input to the actuary– Accept input from the actuary

– Think of the pricing models as helpful tools rather than roadblocks to writing business– Be willing to learn the theory of how the models get to

an answer– Ask if not sure of how to use the tools– Help identify where & when the pricing models work /

don’t work in the real world:– ID where/when the answer is unexpected (high or low)– ID where/when the gap between related quotes is

wider or not as wide as expected– Feedback

– Praise when justified– Suggestions for improvement when justified

CAS 2005 Spring Meeting – Interaction with Underwriters

10 /GE Insurance Solutions

May 17, 2005

Actuary’s Perspective: What should I do to make the Underwriting Process better?– Be a member of the team– Build Tools to help the Underwriters to do their job

better– Faster & easier not just more precise

– Training– On use of tools– Actuary 101 Classes

– Price Individual Deals (upfront assistance, not just referrals)

– Monitor & Report out results – Timely– Interpret what I see, not just report it– Offer praise when justified & suggestions for improvement

when justified

CAS 2005 Spring Meeting – Interaction with Underwriters

11 /GE Insurance Solutions

May 17, 2005

Working Together = Business Success– Joint creation of UW Strike Zone – Consistent Benchmark Pricing – Rate Adequacy Research– Metrics for Managing the UW Staff– Portfolio Management Tools

– Together, we accomplish better results

CAS 2005 Spring Meeting – Interaction with Underwriters

12 /GE Insurance Solutions

May 17, 2005

Audience Participation Time

Examples of when the Actuary / UW relationship :

– was less than ideal – worked great

CAS 2005 Spring Meeting – Interaction with Underwriters