Time to read the ISO Manual again…

When I started in the insurance business some 30 years ago, I began as an underwriter.  This meant I needed to learn the “rules” and how to do rating if I was ever going to put out a quote.  As a wholesale broker I needed to figure out pricing, terms and how to sell the underwriter on accounts that were “submit”.  I always felt I needed to know a significant amount of information if I was going to have the “upper hand” with both carriers and clients.  This was my basis of eventually becoming a “coverage guy”.

Part of my initial training was reading and understanding specific sections of the ISO Commercial Lines Manual.  Without this, I wouldn’t have the necessary foundation of which to build on and understand the technicalities of this business.  I can’t tell you how many times I searched through the classification tables in order to find the most appropriate classification for an account.  There was not always one, so I needed to find the most appropriate one and then convince the underwriter to use that classification.  There were many times that there were additional “rules” associated with a classification and I needed to know how that impacted the account.

Some of the areas that were the most important were the following:

  • Minimum state payrolls. Each state has their own minimum owner payroll and many carriers had modifications to that.  A mistake here could result in a mid-term endorsement increasing the payroll and the agent and insured would certainly NOT be happy.
  • Premium basis. Understanding what each type of premium basis is and what was included was important.  Knowing if it was “each”, per $100 or per $1,000 could make all the difference in rating up the account.  A mistake here could result in a premium 10 times too high or too low.  Carriers also had modification to this such as contractors where they might rate per employee instead of payroll.
  • Details of what was included in payroll. Should executive payroll be included?  Clerical payroll?  Salesmen payroll?  Overtime or holiday double time?  Other forms of remuneration?  Knowing the rules here could help significantly reduce the premium basis and subsequently the premium.  This could mean the difference between writing an account or just narrowly missing it.  Since carriers allow for up to three years to audit an account, you can go back that many years and possibly get significant return premiums by properly applying the rules.  Do not assume the auditor knows all the rules.  You may also want to “school” your client on these rules so they properly keep track of proper payroll and do not have any surprises at audit time.  Also make sure your carriers do not have any modifications to these rules.  Know what Rule 24 is?  A clue, it gives many of the important payroll rules.  When you get bored one day, do an internet search or e-mail me and I will send you a copy.
  • Square footage. There are a few quirks here too.  Sometimes carriers base their premium basis on “customer accessible” square footage.  Calculating this out can sometimes make a significant difference.  I have also found that relying on county property records can be an issue.  The county property records may not have included a recent addition or change and will be picked up when the carrier inspects the property.
  • Additional insured endorsements. In over 90 percent of requests we receive to add additional insured’s, we are NOT given the specific endorsement that should be added.  This begs the question, if the wrong one is used, whose fault is it?  All requests for additional insured status should give what endorsement form number to be used, when it is to be effective, the interest of the party looking to be added as additional insured and any other specifications that are needed.  Using the wrong additional insured could even cost your client a bid for a job if they catch this detail and reject their bid, no fault of their own.  Keep in mind that certain additional insured endorsements are “free” and some may incur a charge per additional insured.  Talk to your client up front about how many they expect so you know if you should pursue a blanket additional insured or not.
  • Rule 85 – Know what this is? This the rule that defines the criteria for a specific risk on if the fire rate will be specifically rated or class rated.  A good risk is eligible to be rated after ISO inspects it and takes into account all fire protections.  This can make a risk come in with a much lower rate than if it was class rated.  You need to check the effective date of the rating and check with your customer to see if any changes were made since that time that would improve the fire rating.
  • Debits or credits – The ISO manual defines what the potential credits are bases on certain criteria. Of course carriers may have their own criteria that supersede this criteria so also know the modifications your carriers make and your authority to use this debits or credits.
  • Package credits – Who doesn’t like credits. There is a wide range of package credits based on classification.  Your carriers may also have modifications to these.
  • Deductible credits – Does your client have a higher tolerance to retaining risk? If so, you can quickly figure out how much they might save by going to higher deductibles.
  • Construction definitions – Questions on masonry versus masonry non-combustible? Definitions are here so you can properly determine the proper construction class.
  • Changes – ISO goes out of their way to discuss changes being made to classifications, rules or forms. You need to read and understand the changes so then when your clients ask about them, you are on top of them.  This is especially true if there is a reduction in coverage.  Keep in mind that carriers do not immediately accept changes and you need to watch for their adoption date.
  • Exception pages. There are always exceptions.  Many do not apply to what you are doing, but you need to make sure if they do.

While reading the ISO manual may not be an exciting read, it could help you out in writing business.  Knowing the rules will help you to use them to your advantage and show your client that you understand the minutia of your business so they don’t have to.  How much would your client love you if you were able to get them a return premium from the policy they previous wrote with another agent?  Think helping them out would help solidify the new relationship?  Just like in golf, it is important to know the rules so you can use them to your advantage.   Happy reading….

Ken KukralKenneth Kukral, CIC – VP of Special Risks – That means, call me if you need help on placing a unique, difficult, large or more complex risk. Kennethkukral@intlxs.com  800-937-3497 ext 2079

What Makes a Good Underwriter?

By Ken Kukral

checklist

A recent article in National Underwriter got me thinking:  (read the full article here)

They boiled the qualities of a successful underwriter down to 4 things, but I think they left a couple things out.  The four things they found in a successful underwriters were:

  1. Maintain underwriting discipline
  2. Think outside the box
  3. Strive for a human connection
  4. Set yourself apart

Let’s discuss these and go a bit further.

Maintaining underwriting discipline.  Does this mean that the underwriter is consistent?  They look at a risk fairly and treat the risk the same for all agents?  They don’t write business they have any business writing (soft market expansion of classes).  To me this means the underwriter shows a long term consistent approach to looking at accounts.  The underwriter gives each risk a fair shake and you know they have given it a fair shot and priced it reasonably if they can write it.  No surprises.

I think this also means “looking for a way to write an account”.  Having an open mind and learning enough about the account to determine if it meets the underwriting guidelines for the carrier.  Over the years I have encountered many an underwriter who from the outset, is looking for a way to decline the account.  All gray area is taken in a negative connotation and unless ALL the stars line up, they will never quote the account.  All you want is for them to give it a shot.

Think outside the box.  In my thirty years in the business, this is one of the hardest things to master.  Many underwriters have become “box underwriters” and unless it fits the box, they decline it.  The “exception” underwriter is a dying breed and many underwriters are in fear of “coloring outside the lines”.  Just because a risk is unusual, one of a kind or “not like the others”, doesn’t make it a bad risk.  Some of my toughest “sells” to an underwriter has been accounts, they literally couldn’t have a loss, but the underwriter wouldn’t quote the account.  Coming up with a proper classification is an “art form” and not everything “fits the box”.

This can truly mean, looking for every possible angle to write an account.  Staying in the fight and duking it out till all your questions are answered and you have a comfort level with the account.   Especially if it is not a large account and will take some “work” to get the account done.  Not every coverage is readily available and might take some creative underwriting to come up with a solution.

A couple of examples of thinking outside the box:

  • We were able to come up with a solution for a large account where if they invoked their disaster plan and the hurricane veered off and there was not direct physical loss, they would have lost $1,300,000. So we were able to negotiate with a carrier for false trigger of disaster plan coverage.
  • We were approached by an agent whose client was a plaintiff’s law firm. They had evidence and documents stored in a warehouse, awaiting trial and were looking to insure for the expected settlement or award judgement that would be “compromised” if that evidence was destroyed by a direct physical loss.  Due to the “valuation” issue, we were not able to secure this coverage, but were able to find a carrier who would insured for the amount of expenses already expended on the case that would not be able to be recouped.

Bottom line, a good excess and surplus lines broker, who has been in the business for many years, has a wealth of knowledge and can many times find “solutions” to clients risk problems, by thinking outside the box.

Strive for human connection.  Trust is earned with an underwriter and the human connection cannot be under estimated.  So many times, submissions are e-mailed in without any phone conversation (or even a narrative).  Running an account past an underwriter can pay excellent dividends.  You find out what information they want, what the chances of placing the account and what the “hot points” are in dealing with the underwriter.  By having a preliminary discussion with the underwriter you can approach a potential client and get them on the same page with the underwriter from the beginning.  This will help a client feel like they are both working towards the same end and are not on either side of the fence.  This reduces a chance for us, versus them type of scenario.

How many times have you seen where after a face to face meeting, a dinner or an agency visit with the underwriter, you all of sudden start writing more business with that carrier?  A chance occurrence?  I think not.  It is a matter of building the relationship with the underwriter, finding common ground and a human connection.  It takes time and is a building process that pays long term results.

Set yourself apart.  Stand out in the crowd.  Don’t be a faceless drone.  Be the one they want to call first.  So this might entail taking more calls, sending periodic updates on where things stand or JUST GETTING THE JOB DONE.  While just getting the job done may not seem like something that sets you apart, it is.  As an underwriter, you want to be the “go to” underwriter.  The one they call first when they get a new piece of business.  The one who gets the “last shot” on an account.

This might mean staying late to get them a quote, knowing their cell number so you can get a hold of them at a moment’s notice or finding out up front what their client expects so you both don’t spin your wheels if you can’t meet the timing or pricing expectation.

So what did they leave out?

Qualifying accounts – Every underwriter can’t quote and write every account that comes in the door.  So asking a few questions up front, possibly putting out a rough indication or even declining an account if you know you can’t be competitive.  Respecting both your time and their time can be critical and will be important in the long term.  Who wouldn’t like to quote fewer accounts, but write more of them and have a higher hit ratio?

Just being responsive.  There is nothing better than a quick response.  Even if it is, hey, I received your submission and will look it over, looks like something we can do.  You would be surprised how many times, the first quote in gets the order.  Also remember a “quick no” is also good.  Allows the agent to go on to another carrier who can help them out.  This type of quick response can leave you in the number one position so you get first shot at that agent’s business.

Anything I missed?  Any other characteristics of your favorite underwriter?   Would love to hear your thought!

Ken KukralKenneth Kukral, CIC – VP of Special Risks – That means, call me if you need help on placing a unique, difficult, large or more complex risk. Kennethkukral@intlxs.com  800-937-3497 ext 2079

Little tricks of the trade in the surplus lines business

Group of Business People Meeting

Over my 29 years, I have learned a few things and I would like to share some of those items with you.  Take them or leave them, they may help you out too.

  • Take a little time to learn about the prospective account. I have worked on many accounts where the “story changed” two or three times before getting down to what the account really did.  It is tough when a rush item is sent in, then going back and forth with the underwriter after the “story changed” when we asked more questions.  This causes the underwriters ears to “perk up” and they feel they need to dig deeper in order to have a comfort level.
  • Sometimes coverage is available on admitted paper. Do not assume just because you are going to s surplus lines broker that they will always use non-admitted paper.
  • Find out what endorsements you will need up front. This includes waiver of subrogation, primary and non-contributory wording, additional insureds, blanket additional insureds, stop gap liability, Employee Benefit Liability and per project aggregates.  It is easier to ask for these items up front and get them included in the pricing, rather than ask for them later.  Sometimes carriers cannot offer these and if they are required, we can move on to another carrier and not waste time.  Keep in mind also that most carriers in the E&S business charge EXTRA for these endorsements.
  • Read through the terms and conditions and ask for specimen copies of endorsements if you believe the endorsement/exclusion may be an issue. That way you can inform your client where their coverage starts and ends.  There are times exclusions can be “bought back”, so it can’t hurt to ask.
  • Different carriers use different premium basis. For contractors, some rate based on payroll and other base premium on receipts.  Some other base them on the number of owners and number of employees.  So make sure you include ALL of the potential premium basis when sending in a submission.  Keep in mind to break out owner payroll, clerical and sales payroll from the rest of the payroll.  A number of classifications exclude this payroll and that can help bring the premium down.  If fact, you may even want to do a three year look back on their payroll and see if they have been over charged.  I know of one such account that when we did this, we were able to get the insured $200,000 in return premiums!  Think they were happy?
  • One more note on payrolls. If your insured is doing a hazardous operation, such as say demolition, it would behoove you to break out the payroll by classification.  So for a demolition contractor, how much payroll actually goes to the demolition classification?  Should part of the payroll go to trucking (trucking the debris away), some to backfilling or grading of land (filling in the basement), some to debris removal… etc… you get the idea.  That way the proper amount goes to the highest rated classification.
  • Certain classes of risk require supplemental applications. Contractors require a contractor’s supplemental application.  Restaurants, bars and taverns require a hospitality supplemental application.  Apartments require a habitational supplemental application.  Find a comprehensive one you can use and be consistent.
  • If you can, try to determine the proper ISO classification. This alleviates the chance the underwriter will use the wrong one.  Many E&S carriers have manuals that break out the specific ISO classification and make it within binding authority (for the MGA), submit or prohibited.  So if they pick the wrong classification, the risk may be declined.
  • Just because you are “going E&S” doesn’t mean that you can ask for the endorsements or coverage you believe the clients need. You may get a quote with more restrictive coverage, but at least you asked for more expansive coverage.  Many markets can add expanded GL or property endorsements or some of the “fringe” coverages you need.
  • Websites – Nearly ALL underwriters will check out a risks website, so you might as well too. That way you can explain any disparities between the application and the website upfront.
  • If you know prospective pricing, let us know. We can quickly tell you if the expectations are unrealistic and save both of us a lot of time.
  • Narratives are appreciated. They become “rare” anymore and a submission with a good narrative actually stands out from the crowd.
  • We like to know what happened to the account… Many times we get in a rush submission, pull out all the stops.. send out a quote.. and never hear anything again…. We like to know what happened to a risk if we didn’t write it so we can find out what we did wrong or if our markets are not competitive.

I hope sharing some of these “tricks of the trade” will help you out.  I would appreciate hearing about some of the things you found out in this business that have helped you along the way.

Ken KukralKenneth Kukral, CIC – VP of Special Risks – That means, call me if you need help on placing a unique, difficult, large or more complex risk. Kennethkukral@intlxs.com  800-937-3497 ext 2079