Underwriting is one of the oldest, yet least-appreciated professions in the world. The act of setting premiums and offering insurance products built the modern economy, yet the profession goes largely unnoticed.
For this reason, the amount of advice out there for new underwriters is somewhat limited. There simply aren’t a lot of resources for people just entering the profession.
This post aims to change that. In this article, we take a look at some sage tips that will help you become a better underwriter and excel in your profession. Underwriting is essential for providing consumers with valid insurance products that support their needs. Without the right amount of cover, business projects might not proceed, people will become more risk-averse, and the economy will slowly grind to a halt.
Here are some tips designed to help you become a more successful underwriter:
Do Things That Set You Apart
It’s easy for underwriters to simply follow protocol robotically, categorizing client risk levels according to predefined actuarial tables. And there’s a reason for that: it supports the insurer’s profitability. If underwriters didn’t pay close attention to risk, firms would go out of business rapidly.
With that said, underwriters also need to use human skills as well. Risk isn’t programmable. It’s not something that a computer can ever fully understand.
For this reason, there needs to be a human element in risk assessment. Underwriters should take procedurally-generated risk profiles and then modify them to represent the real-world risk that they face.
These evaluations are an opportunity for profitability. Natural disasters, economic shocks, and new technologies are all changes to the system which adjust risk profiles. Underwriters who can spot and quantify these changes before the rest of the market have an opportunity to generate supernormal profits in the long term.
Underwriters should also keep a close eye on changes in the regulatory or legal framework underlying their business models. New laws and rules can dramatically adjust the risk profile of insured parties, usually lowering it over time. If clients present lower risk, it means that you can lower their premiums and capture more of the market before any other players in your industry see what’s going on.
Be Human In Your Approach
Modern software is making it easy for underwriters to offer premiums that accurately reflect a person’s risk profile. However, because underwriting is a fundamentally human business, personally connecting with clients is still important. While your customers are looking for the lowest price, they also want someone they can talk to about their premium and risk profile.
Being able to talk to them in-depth is a great way to prove that you are different from the competition. The more connected you appear, the more you’ll stand out from your rivals. Holding a face-to-face conversation with a client could be the difference between winning their business and not, even if your premium is more expensive than another brand.
Many of the most successful underwriters are highly social extroverts. While they enjoy the technical side of what they do, they also want to engage with their customers, talk to them in-depth about their premiums, and tell them what they need to do, if anything, to lower them or get a better deal. Part of the joy of the job is the negotiation process. They like being able to go back and forth with clients on price, looking for ways to give them a better deal, and improving contracts over time. It’s this relationship aspect that provides the real joy of the work.
Don’t Think Inside The Box
It’s easy for underwriters to think inside the box, but the most successful don’t do this. They constantly tinker with their underwriting systems to find new methods that serve themselves and their clients better. Innovative underwriting makes the job interesting and keeps you on your toes. No underwriter ever priced risk perfectly, so there is always room for improvement.
Thinking outside of the box can mean any number of things. Click here to see some examples.
For instance, it could mean using better software to measure and record risk that includes more features than conventional spreadsheets. It could mean looking for new insurance opportunities in markets that are underserved by existing products. And it could mean finding ways to insure clients that other providers turn away.
When underwriters become more innovative, they build stronger relationships with the people around them. Eventually, they become a trusted resource, able to charge higher rates than the market average.
When you can’t physically see client risk, it’s tempting to put downward pressure on pricing and reduce the stringency of your terms and conditions. However, you shouldn’t sacrifice long-term gains for short-term sales. Remember, if you price too low, then eventually that will hit your profits and could cause the business to make a loss.
Underwriting discipline requires keeping account volumes high, but not at the expense of the viability of the business. A much better approach is to charge accurately so that you can pay out when customers really need your help. The more you can meet the needs of claimants, the more the market will trust you, and the more likely it is that you’ll win new customers.
Successful underwriters don’t look for opportunities to deny their customers insurance. Instead, they create plans that cover all insurable eventualities. This way, if a customer does make a claim, they can feel like they are getting good value for money.
If there is a common reason why insurance products don’t pay out, then make the customer aware of that. For instance, if you’re selling bike insurance policies, make it clear that policy owners must keep their bicycles locked up inside their homes in order to make a claim in the event of theft. Be upfront about the terms so that policyholders don’t go away with the false belief that they are covered for all instances of theft. Be blunt about what you can cover to build trust and avoid client disappointment in the future when they make a claim.