The Underwriter's Paramount Question - “Is This A Good Risk?”

It's the question before you write it, at renewal and just about the entire time you're insuring it. Even when you have thoroughly reviewed all of the underwriting information, the submission, the financials, loss runs, MVR's, etc., you're not convinced to write it until you get the loss control report. Even then, the best you can do is to hope it performs well. While you don't have direct control over future losses, you can write better risks. You can influence those risks, during the policy period, regarding their loss control program's effectiveness. You can stay abreast of the ever-present changes in risks that may increase exposures. Loss control can help “drive down” losses. Driving down and holding down your program's overall loss experience ratio involves risk selection and the loss control activity you conduct during the policy period.

Let's face it; most insureds don't keep an EFFECTIVE loss control program going very long. In fact, it's rare that a company will MAINTAIN a very high priority on loss control. Why?

• Many companies do not allocate the necessary resources (time, money, personnel)
• Safety is usually among the first cost-cutting elements
• Safety lacks support
• High turnover among safety personnel
• Inexperience, inadequate safety training
• Failure to integrate safety into the operation
• Time. As mentioned above, time is a necessary resource. Even if a company allocates necessary funds, there is still the need to have the time available to dedicate to research, development, training, etc. Training takes precious time from everyone involved. Safety must be a very high priority or the individuals involved will not allocate the time necessary to complete vital elements.
• Little outside influence, until the need becomes obvious

Once the decision is made to write a risk, how do you continue to keep losses to a minimum? As stated above, it's likely that most of the insureds in your book of business will NOT maintain effective loss controls. This is true even with those risks that have seemingly maintained low loss ratios over the past several years. As stated in the past, “the absence of accidents does not indicate the presence of safety”. In fact, as most underwriters know, it's not uncommon for these risks to suddenly change course, for the worse! If your loss control budget allows only one insured visit annually, you will at least be able to re-assess the risk, but you will do little in the way of KEEPING losses down. Your loss control rep should visit every insured at least once a year.

Basic Steps:

• Develop at least a minimum strategy with loss control personnel.

1. Initial qualifying evaluation, recommendations.
2. Visit or phone contact (Did insured receive and understand recommendations? Questions, assistance, etc.).
3. Subsequent visit (i.e. recommendation follow-up, loss review, loss prevention assistance).
4. Renewal evaluation.
5. Continue the process every year. Just as we advise insureds, persistence pays in the loss control arena.

• Allocate resources - this can be very inexpensive with the proper LC strategy and cost-effective.
• Apply the strategy, exactly as planned, over the projected period.
• Retention: (this is the bonus) Keep the best performers - you probably will, since you have also provided some very valuable services.