Endurance Worldwide Insurance business development manager Jon Houghton says insuring property shouldn't be complicated.
Endurance specialises in property insurance, focusing on specialty product lines.
Jon writes about the difficulties of property insurance and how it can be simplified using a few straightforward methods.

On receipt of a presentation, the risk is assessed, and quotations offered by underwriters. If the client likes the price, the insurer will assume the client's risk and issue a policy. In the event of a claim, payment is made in accordance with the policy.

How simple was that?

The first complexity involves the assessment and pricing of risk.

At Endurance, as a relatively new organisation unencumbered by past ‘baggage', especially old liabilities, the premium reflects the underwriter's view of the risk, without the need to take account of historical uncertainties.

Also Endurance buys virtually no reinsurance, which means that client risk is retained wholly within the balance sheet. This has the effect of reducing the frictional costs of the risk transfer process, ensuring the current and future approach to risk is driven by Endurance underwriting rather than supporting reinsurance underwriters.

This illustrates that understanding an underwriters approach to risk and pricing first requires an appreciation of the business model that the underwriter works to.

Through using an underwriting approach that revolves around a detailed analysis of the clients risk and the use of sophisticated claims and exposure databases you have a affect the in pricing in large events such as wind, storm and earthquake. As a result we can demonstrate transparently to a client how the price reflects their risk from each peril.

There is also the issuing of a policy wording that is agreeable to all parties at the point of inception of the contract. The collective track record is not great here, most recently illustrated by the World Trade Centre claims dispute. Going forward this is not acceptable, particularly as regulatory pressure is brought to bear.

Also crucial is the underwriter's insight into the clients risk factors based on their own experiences. These include the physical aspects of the risk, the track record and less tangible factors such as the client's attitude to risk management and ongoing improvement of risk.

Then there is factoring into the analysis of emergent risks.

The recent tragic events in Asia and the UK floods have again highlighted the complications that occur, after the event, in quantifying the loss.

Firstly access has to be gained to the loss site prior to any assessment and in the case of a major event, mitigating and agreeing the business interruption loss will be of prime concern.

Clients look to insurers to minimise volatility from their balance sheet, for a premium. At a time when pricing pressure is re-emerging, those clients interested in longer term relationships with underwriters should invest time in appreciating the business model and factors affecting the risk assessment.

At Endurance the business model is designed to reflect current risk and reward risk improvement. We aim to demonstrate to the client both the insight and analysis of our process and how we calculate their premium. What is clear is that we need to get better at communicating this underwriting process in straightforward terms, particularly given that it is not straightforward at all.

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