Taking on the challenge of benchmarking in excess and surplus insuranceBy Barbara Ingraham | September 13, 2019
It’s important for insurers pursuing profitable growth to be able to benchmark their performance against their competitors’. Companies that measure success solely by their own historical performance, without reference to the industry as a whole, run the risk of leaving money on the table.
Many excess and surplus (E&S) insurers are particularly challenged when it comes to benchmarking. Because they generally insure risks that standard carriers typically won’t cover—from coastal properties to manufacturers of hazardous products—their books of business tend to be smaller than those of most standard insurers, and the exposures tend to be diverse and not necessarily comparable.
Those factors make it hard for many E&S insurers to know exactly how well they’re performing or whether they’re reserving appropriately for the risks they’re covering.
In addition, the surplus lines market is constantly evolving, and E&S insurers have to be flexible. For example, more properties and businesses in wildfire- and flood-prone areas are finding their way onto E&S insurers’ books as construction in these zones increases and some standard insurers look to balance their portfolios by taking on less of this business. To manage these new risks, many E&S insurers have to adapt their underwriting approaches.
Pooling data for mutual benefit
To help address the challenges, Verisk is exploring the creation of an E&S data pool to help insurers do a better job of selecting risks, pricing policies, and spotting trends that might support profitable growth.
The pool would focus on the contract-binding segment, in which insurers have delegated binding authority to managing general agents (MGAs), program administrators, or other third parties. Insurers in this segment typically write similar types of business; and although coverage is often customized, programs frequently use ISO language and loss costs as a starting point.
The data collected will be aggregated to protect the anonymity of contributing insurers. Any output, analysis, or access will be for the benefit of contributing companies only.
Such a pool would help address the scale and diversity issues facing many excess and surplus insurers and help individual carriers assess their performance, which they can use to help support their growth strategies.
Insurers interested in participating or learning more should contact their ISO representative or send email to Excess-Surplus@Verisk.com.
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