Empower your underwriting teams and things in the property market will look brighter

Experience counts in the UK property market. Unfortunately a number of the main players recently have focused on market share, cost-cutting and living off investment returns rather than on underwriting. As a result, a market that was worth £5.6bn in 2004 now stands at £4.5bn.

This fall-off in income – hastened by rising claims costs in the recession – makes it imperative that commercial property insurers refocus on underwriting profitability and delivering for shareholders.

A turnaround looks like a big task. In reality all it needs is a relatively short checklist of insurance basics: recruiting experienced underwriting talent, empowering them with the appropriate risk appetite, installing good quality claims and risk management services and, most straightforward of all, valuing strong face-to-face relationships with brokers.

Insurers that have deskilled their underwriting teams as a cost-cutting measure are now faced with a significant challenge as the risk profile of the UK property market becomes higher as a result of the recession.

It is vital that time and effort be invested and the appropriate underwriting skill used now to ensure that property portfolios are judged on likely future losses rather than their performance during the boom.

At every stage, the intervention of experienced underwriters can make a difference, particularly in those sectors, such as the food industry, which continue to deliver rising and unsustainable losses.

Many have reacted by calling for an across-the-board rate rise. But I believe that the focus instead needs to be on building effective underwriter-led organisations that concentrate their efforts on risk selection and on achieving the right price for each one.

For some of the large UK commercial property insurers, the focus is on costs not value – not a realistic approach when underwriting complex property risks. This has meant senior professional posts are either cut or the ability to underwrite is curtailed by an over-controlling centre.

Underwriting commercial property should not be approached as a one-size-fits-all business; rather the focus needs to be on the specific and often local conditions that require specialism, experience and industry knowledge.

The only way to successfully tackle these challenges is to employ a senior team that understand how to underwrite commercial property and, most significantly, are empowered to do so.

Their skills will steer clients away from focusing on premium cost, to a more sustainable thinking that values risk management services and efficient claims handling.

With the UK property market dominated by five large insurers underwriting nearly two-thirds of all risks, making an impact may seem a daunting task. However, I see this dominance not as a threat to QBE’s ambitions, but as an opportunity to demonstrate what a flexible underwriting-focused organisation of empowered individuals can deliver to the market. IT