Great Specs

(APPLICATIONS, LOSS RUNS & NARRATIVE ARGUMENTS)
"Prepare as if it were a lawsuit."

HOW TO ASSURE YOURSELF OF THE LOWEST COST INSURANCE PROGRAM

Insurance company underwriters receive as many as 100 applications each month. To meet his or her goal, each underwriter typically needs to write less than 10 of the submitted accounts (new and renewal) each month. Most applications are declined.

The battle for the attention of the underwriter is largely a matter of submission quality. Having successfully negotiated insurance programs for hundreds of clients, we have learned that to negotiate a great deal on commercial insurance, extremely strong specifications are needed.

Because insurance underwriting is so terrifically subjective, a great, written argument must be made, much as if the client were going to court.

Minimum, required information to generate a quote is actually quite limited. However, because of the subjective nature of underwriting, the information necessary to generate a great quote is quite broad. The value of going well beyond the required information is tremendous.

Specifications must not only provide the basic required information, but make dozens if not hundreds of arguments as to why the risk being considered is far superior than the risk would appear in the basic information. However, very few brokers go to the lengths necessary to get a great deal.

The experience required to build such arguments is in many cases lacking. Also, putting such arguments together is hard work, requiring hours of interviewing, organizing, revising, analyzing losses, exploring potential new arguments, etc. Underwriters will tell you that brokers - as a rule - do not produce great specifications.

THE ROLE OF THE BROKER

However, the effort is needed on every risk, no matter how apparently simple the risk, in order to:

  • Make the submission stand out to over worked and overloaded underwriters.
  • Eliminate the underwriters fear.

Underwriters fear having a loss from an exposure that the underwriter should have known about, but didn't. By putting all of the descriptive argument in writing, the underwriter becomes comfortable with the risk. Underwriters care less about profitability on any one account, and will price an account aggressively, once they are comfortable the risk has been fully explained. Any one account may be unprofitable - the underwriter is typically judged on the results of hundreds of accounts.

  • Allow the underwriters to defend themselves.

What underwriters really care about is that they can defend their decision to write an account, should adverse loss experience develop on that account. By putting all of the arguments in writing, in the underwriter's file, the underwriter can be more aggressive, knowing the underwriter can defend themself - and their job - should something go wrong.

  • Make the underwriter’s job easy,

enticing the underwriter to quote without a long series of time consuming follow-up questions.

  • Make underwriters more aggressive

on their pricing, because the arguments justify superior pricing.

In summary, great specifications (with numerous detailed arguments about why your risk is superior) result in more quotes, more comfortable underwriters and better pricing.

Most important: consider that the information gathering process is lengthy, time consuming and frustrating for all, including the broker. It is the single biggest reason brokers often:

  • Perform poorly on new accounts
  • Deliver quotes late

Most insureds have experienced times when brokers have not made a strong effort. Underwriters see the same every day.

A NEW APPROACH

However, if the information gathering process is completed for the broker in advance – and further, the broker is provided with strong arguments for a great quote – any broker would see that the new ratio of time invested vs. potential reward is now extremely favorable to the broker. The heavy lifting is done, and brokers will be eager to persuade their favorite underwriters to quote aggressively.

CLIENT CONTROL

By delivering great specifications, the client now controls the process. If the client wishes, more brokers and underwriters will now work on the account. (You also save time answering underwriter questions, if the specifications are done right, one time, for all.)

  • The cost to prepare specifications: A small fraction of your insurance cost.
  • The benefit to your company: Huge.

A WORLD OF OPTIONS

Instead of turning away the insurance brokers who call you, with a mouse click, you have the option of sending complete specifications, at any time, to any broker or carrier that might have something of value to offer.

The time-consuming process of information gathering, which for so long has been an impediment to getting positive, prompt responses from brokers and insurance companies, has now be removed. When you receive a call from a broker, direct writer, specialty program, or captive program, you can immediately send the specifications to that caller. If they truly can improve your program, you have the ability of confirming that without even meeting with them.

Brokers with access to competitive insurance companies will now deliver great quotes. You can also encourage the best brokers and/or insurance companies to look at your risk, because it is easy for them to do so.

Quite simply, this is the way insurance should be done.

Specifications – Potential Arguments
(Sample)

Basic Required Information

Potential Additional Arguments

Payroll by classification

Payroll does not accurately reflect exposure, because:

  • Hours worked are less than industry norms;
  • Employees are paid more than average wages;
  • The classification contemplates exposures which do not exist for the majority of the employees for this risk.

Loss History

  • Losses do not reflect future exposure because:
  • Operation discontinued;
  • Procedures changed;
  • Employee reprimanded/fired;
  • Activity now subcontracted;
  • New equipment being used;
  • New safety procedure in place;
  • Loss is disproportionate to injury;
  • New medical provider would not have allowed the loss to develop adversely;
  • Etc.,
  • Etc.,
  • Etc.

The above is for descriptive purposes only, and is therefore extremely brief.  There are typically hundreds of potential arguments on each account.

In addition, Net Cost Advisors, Inc. will make many recommendations to the client, which if adopted, can allow for further arguments about the improved/superior nature of the risk.