The Need for Systematic Prioritization in Commercial Lines Underwriting
I’ve had the opportunity to spend part of my career helping insurance carriers and their underwriting teams to increase their submission flow in the face of failing premiums and a seemingly bottomless pit of capacity. At that time, with premiums and thus commissions on the lower side, it made a lot of sense for carriers to focus on client acquisitions. It was a natural opportunity to really focus on building out distribution networks and deepening relationships.
Today, the dynamics have changed for several markets, likely due to the current hard market, and I now hear regularly from underwriting teams that are drowning in submissions.
These instances of submission overload seem to be most common in those products and industries hit hardest by the firming market, especially in Excess & Surplus (E&S), where the market has grown by 20%. I’ve heard tales of shared submission email inboxes that are overflowing with submissions that haven’t been touched or responded to, not to mention those sitting in underwriters’ personal inboxes. At first blush, this may sound like a nice problem to have, but is it really?
Success in the insurance industry is rooted in relationships, particularly for underwriters, who spend their careers cultivating partnerships. Underwriting teams must be responsive in order to maintain their relationships and grow their distribution networks. If submissions are falling through the cracks, some savvy brokers will take steps to get your attention so that their clients can get quotes, but others will just write you off.
The business benefits of responding to all submissions go beyond cementing a reputation for being timely and responsive. It also unlocks the opportunity to quote more business and thus write more premium, as innovations like easier access to data and smoother workflows facilitate a more scalable underwriting process overall.
The Business Case for Systematic Prioritization in Underwriting
When I talk with underwriting teams, I often ask them what their submission-to-quote ratio is. Some can answer that question, but those who are truly drowning in submissions usually have no idea. How could they, when they don’t fully understand the scope of their submission inflow? However, what almost every underwriting team does know is their quote-to-bind ratio, which is a key factor in discussing why underwriting teams need to regain control of the overflowing submission inbox.
To help illustrate this, I’ve provided a table that looks at the economic impact of changes in a carrier’s quote rate. This basic example looks at an average policy size of $10,000 with 1,000 submissions per month.
Let’s examine the quote-to-bind ratio of 20%. With every 5% increase in submission-to-quote, this firm realizes an additional $100,000 in premium a month or $1.2 million a year. But if the quote-to-bind ratio increases to 50%, a 5% improvement in submission-to-quote yields $250,000 a month in premium or $3 million a year. The 5% increase is a basic benchmark figure, but this grows with the ability to quote more business, assuming the quote-to-bind ratio remains consistent as the volume increases.
One of the counterarguments to this could be that not all of those submissions would fall into your appetite, so how could you quote them? This is certainly true, but it’s also the case that knowing more about all those submissions that you are currently missing enables you to better work with your distribution partners to understand your appetite and perhaps create new product offerings better aligned with your distribution.
By now, hopefully you agree that it makes good economic sense to find a way to address all those untouched submissions in your inbox. After all, this business cycle will eventually move on and reduce these volumes, so now is the time to make the most of them and not squander important relationships.
The key question: how will you suddenly find the time to address all these submissions? Fortunately, there’s technology for that. Leveraging tools to ingest, enrich and systematically prioritize submissions not only helps teams focus on managing submission flow more efficiently, but ultimately frees up time to focus on the things humans are really good at: building relationships and making decisions about risk.