Spot the difference for underwriters


This is an aerial view of main location of the risk to be insured: Generic plc.

Company activities at and associated to the premises include: Property Owners; Manufacturing (incl. use of heat & work at height); Assembly (incl. clean room); Warehousing; Import/Export (loading/unloading – incl. quayside); Plant Owner/Operators; Wholesale; Distribution; R&D; Design: IT (mainframe); Admin./Accounts; Training, etc.

For the purposes of the task, let us assume that they are 2, competing, risks both with identical processes, sums insured, limits with similar EML’s, operational structure, growth history, financial performance, global customer/supplier footprint, credit profile, risk management and claims experience. The type of enterprises that are within the target range of risks that you are charged with securing in a competitive market place.

However, one of the risks is, significantly (measurably), more resilient than the other…sufficiently so that it could provide you with the competitive advantage required to secure the account. So, as an insurance, credit or financial risk underwriter:

Q. How do you identify and differentiate between the good and bad risk, providing a verifiable basis for an underwriting decision that enables you to win the business? Read more of this post

“Both insurers and insurance intermediaries need to fundamentally rethink how risk is assessed”


Not my words but those of Achim Bauer, Partner in PwC’s Insurance Practice. I will be really surprised if any more than 1% of industry “leaders” have read these words before, even though they appear in an industry report that was released in early 2010.

Perhaps it would have had greater impact had it been distributed to shareholders in major insurance firms. Because, whilst they may not be risk experts, they are unencumbered by traditional techniques, engrained belief systems formed over many years and justified (not validated) by decades worth of risk data.

Financial Services has a great technique for dealing with “the inconvenient truth” when it comes to risk and other people’s money. It is something that Ostriches are known for and is the perfect position from which to claim that some major, traumatic, loss event was “unforeseen”. Then, after the event, blame another feathered friend: the Black Swan.

It is worth remembering that unforeseen does not, necessarily, mean unforeseeable.

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