A cut above: Improving commercial underwriting from strategy to execution

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June 2016


Property and casualty carriers came out of the financial crisis of 2007-2009 relatively unscathed. But today, many commercial lines carriers could be running out of ways to grow profitably. They face increased competition, a softening market, low interest rates, producer consolidation, and a coming wave of retiring underwriters. To compete, they must get relentless about articulating their strategy, building it into processes and controls, monitoring results, and preparing staff for the future.

Many commercial carriers are re-examining their underwriting strategies to improve the way they manage risk, but these strategies aren’t always the hard part. At many carriers, the operating models they rely on to execute those strategies could use some closer examination, too.

Technology is changing rapidly, and many carriers have moved toward more automated underwriting decision-making.This is likely to increase—but technology alone, without professional expertise alongside it, won’t succeed.

1 PwC, “Insurance 2020 & beyond: Necessity is the mother of reinvention,” 2015, www.pwc.com, accessed April 1, 2016

The challenge is figuring out how to get the most benefit from the commercial underwriting process. In our experience, there are four key components to commercial underwriting success:

  • Articulate – Turning business goals into a set of actions that everyone can follow.
  • Embed – Designing underwriting processes that reflect the strategy in day-to-day decisions.
  • Monitor – Measuring results to make sure the processes are being followed, and using them to improve.
  • Develop talent – Helping junior underwriters exhibit sound risk selection and assessment skills before building other skills.

If communication is ineffective, you’ll get inconsistent underwriting decisions and poor underwriting performance. If you don’t embed your underwriting strategy consistently in day-to-day operations, you’re leaving it up to chance that individual underwriters will shape a book of business that reflects the business strategy. Additionally, while measuring results is important, you need to strike the right balance of monitoring at the transaction level versus the portfolio level. If, for example, you establish too many tripwires at the transaction level, you’ll miss out on valuable opportunities due to slow decision making. Finally, without the necessary foundation to underwrite in line with the strategy, talent development suffers and performance falls short.

The framework we present here—articulate the underwriting strategy, embed it in day-to-day situations, monitor the results, and train for the future—is all about “blocking and tackling.” Regardless of industry sector or geography, every commercial carrier needs to manage these basics. And now, more than ever, managing the basics can point the way to sustained and profitable underwriting growth.

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Francois Ramette

Partner, PwC US

Katie Klutts

Director, Insurance Advisory, PwC US

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