It has been interesting to note the recent trend by the insurance market to outsource accounts work, claims work, surveying work and so on, but the one area by and large ignored is the outsourcing of underwriting.

There is no question that, provided the work is outsourced to the right people (not just the cheapest), cost savings are made.

But even when several hundred thousand pounds are saved, the effect on the overall loss ratio on a large premium book is not that great.

A £1m saving on a £100m account is only 1%. If the quality of underwriting is poor, then the loss ratio is also likely to be poor. Only recently Henri de Castries, AXA's chief executive, blamed "insufficient underwriting'' as a reason behind his unsatisfactory property and casualty results.

Did he mean he has underwriters who have lowered their standards or did he mean some of his underwriters lack knowledge in certain areas? This is, of course, not the fault of the underwriters per se, but several factors spring to mind.

Lack of training is the obvious one, but staff are put under pressure to achieve levels of income and this is often done by venturing into areas where knowledge of the class is paramount.

Innocent underwriting is a problem for the market as a whole and many have been burnt writing areas where they have no or little expertise.

Take my own specialist area of sports and leisure business. How many companies have pulled out of this area in recent months? Quite a few.

Some companies have, of course, tried outsourcing underwriting by giving the pen away, but this has mainly been to brokers. There are too many conflicts of interest in allowing the same organisation to underwrite business they are attacking, but not so with the underwriting agency. Take the pen away from the broker and it still has the business to broke - take it away from an agency and it has nothing.

It is my belief that the way forward for many in the insurance market is to outsource the underwriting to specialist underwriting agencies that can focus on a particular area with its high levels of expertise. My own particular agency not only does the underwriting, but we handle the claims, collect premiums and issue the policies.

Control is obviously an important factor and it will be necessary to undertake regular audits of the agency, but this will be considerably cheaper than having to employ underwriters to underwrite the business in the first place.
Kim Bullimore
Managing director
The Leisure Consortium at Lloyd's

Use the net to save
I was not surprised to see InFront Solutions claiming that insurers are spending 30% too much in settling building repair claims.

We estimate that through full validation, increased use of technology and by deploying streamlined processes, insurers could save more than £100m a year in reduced claims costs.

We have found that 100% on-site claim validation significantly reduces claims costs. We have also established that more than half of the cost of settling small property claims is administrative, with call centre and claims unit efficiency caused by failures of communication.

We believe internet-based technology can vastly reduce these costs of poor communication, while at the same time delivering big benefits to insurers in the shape of improved policyholder satisfaction and loyalty.
Phil Smith
Managing director

Having a laugh?
I wonder if your typesetters were being mischievous by placing Ian Chippendale's comments "Less tech focus, more marketing" alongside those of Bob and Sandy Scott: "Insurance training to enter a new era."

I have to say I found it strange to read Mr Chippendale's comments at a time when technical knowledge and awareness in the industry is at such a low ebb.

Many people working for companies and brokers have never read a policy and few customers take the trouble to do so either.

Most policies, despite being written in plain English are still ambiguous, unclear and generally difficult to follow.

There is no point in marketing a product if its components are not fully understood by the people who are meant to service it.
Roy Rodger
Motor Insurance Consultancy and Training

The ATE answer
While I agree that after the event (ATE) insurance, may well have been overcharged by some providers in the past, for Duncan Bowker to suggest the remedy is to have the insurance companies run their own uninsured loss recovery departments and take action against themselves in many cases is ludicrous in the extreme.

The real answer is to have properly run and properly indemnified independent ULR companies handling these claims. Insurance companies will not pay excessive claims, so there will be no danger of these companies claiming inflated damages.

These companies have been handling cases under the arbitration limits for many years, so why he should suddenly perceive a problem with this is not explained.

The other and, I feel, the main benefit from using an independent adviser in these matters is that justice will not only be done, but be seen to be done.

To have insurance companies handling these claims is to invite accusations of bias from dissatisfied claimants.

I would also like to hear the opinions of the General Insurance Standards Council (GISC) and the Institute of Insurance Brokers (IIB) on this matter. Who would the brokers prefer to look after their clients?
Lewis Rudge
Business development executive
Motor Accident Claims