Monsters off the edge of the map

Even the best quality policy data is of little value if it cannot be aggregated and visualised to give underwriters and carriers real-time visibility over their exposures.

Underwriters are digitising their businesses at an accelerating pace and increasingly leveraging data to write business more quickly, accurately and efficiently than before.

However, without the right level of searchability, crucial insurance client data can become lost in an ocean of information. The resulting lack of visibility can, at best, lead to delays, errors and inefficiencies. At worst, it can threaten profitability and business relationships.

This is perhaps best illustrated in a real-life example from a Specialty Business Solutions client – a large property MGA that had moved to paperless, was data-rich and had a high level of data accuracy compared to its peers but possessed no in-house data aggregation or visualization system.

The MGA had been instructed by one of its carriers to never, under any circumstances, write barrier island properties as barrier islands are an underwriting nightmare. These highly risky and difficult to manage landmasses are dangerously exposed to hurricane flooding and only accessible by a precariously limited number of narrow bridges when disaster strikes. While this puts barrier island properties firmly in the crosshairs of niche E&S insurers, they are decidedly outside the appetite of fiscally conservative carriers.

When a fire broke out along a barrier island several years ago, the MGA’s CUO was unhappily surprised to realise his company had erroneously written a barrier island property on behalf of the carrier, and the carrier deeply concerned this might have indicated a systematic error in the MGA’s underwriting process.

The carrier demanded reassurance that only one barrier island property had been mistakenly underwritten, asking simply: “How many more of these have you got with us?” An easy enough metric to collate if your MGA wields a reliable data aggregation or mapping system. A bad, bad day if it does not.

Lacking a tool capable of parsing and capturing this data, the MGA had to figure out how to filter barrier island properties from within a portfolio of 86,000 policies. The CUO smartly determined a manual audit was not the solution.

As the MGA had not captured whether a property existed on a barrier island as part of its normal underwriting process, it would have to find a way to verify the zip code of every insured property and determine which, if any, were on barrier islands. The carrier demanded an answer within 24 hours.

The MGA’s IT department set about laboriously coding a system that captured the longitudinal and latitudinal parameters of every barrier island in the United States and cross-referenced them against the geocoding of every property buried within those 86,000 policies.

A week later, IT reported more than 2000 barrier island addresses in the portfolio – a strikingly high number the CUO knew would end the trading relationship with the carrier, which was by now growing impatient. The MGA’s response: “We’re working on it.”

The CUO sought a second option – for a substantial amount of money – from a broker with access to a data aggregation and mapping system. More than two weeks after the first problem property was discovered, the MGA had at last determined that more than 300 barrier island policies had been written on behalf of a capacity provider who expressly banned barrier islands from their portfolio.

But there was still more digging to do. Next, the MGA had to determine which of their underwriters had mistakenly provided final approval on each of the specific bad policies. And how. This required another week of careful manual auditing of the communication logs of all 300-plus policies. “We’re working on it,” the carrier was told again.

In all, it took three-and-a-half weeks to provide an answer to the carrier, which was by now thoroughly unimpressed. This is a situation no MGA, programme or carrier should find themselves in, yet is easily avoided with the solutions now available in the marketplace.

A data aggregation and exposure management solution like Sequel Impact, for example, can be seamlessly integrated with an underwriter’s internal systems and datasets. Impact includes a mapping tool that would have allowed anyone with access to the software to simply click on a filter and look for yellow dots on barrier islands.

“Barrier islands” could also have been blocked or flagged as a referral item, meaning formal electronic approval would’ve been required on each policy – making auditing for fault instantaneous.

Meanwhile, an authoring tool like Sequel Rulebook could have avoided the fiasco entirely as the user could have set up a system parameter that created a ‘block’ for an exclusion in any of the carrier partner’s guidelines – making it impossible to write any policy for a property that existed on a barrier island.

There are many ways that not having a data aggregation and mapping system can ruin an underwriter’s day, month or year.

Having robust tools that automatically detect breaches of underwriting guidelines and offer real-time visibility and flexible searchability of portfolios will be increasingly mission critical in helping ensure business is written consistently and within risk appetite. And the repercussions for firms unable to provide fast, accurate transparency to their capacity providers will only become more severe.

Author: Andrew Cyran, Head of Client Advisory, Sequel
Published: Insider Engage 8 July 2021

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