Why the “flight to high quality” is offensive to the insurance coverage business

For underwriters, this “flight to high quality” has been underway for the previous few years, with the objective of mitigating poor loss ratios by re-pricing enterprise (elevating charges), bettering danger choice and capability allocation, and tightening up protection phrases and situations. On the identical time, insurers have additionally been shoring up their funding methods, as yields have been battered by the sustained low rate of interest setting.

Corrective actions from the underwriting neighborhood are to be anticipated every now and then, given the considerably cyclical nature of the insurance coverage market and the pure fluctuations within the economic system. On this regard, I discover the underwriters’ “flight to high quality” acceptable.

Nevertheless, I can’t say the identical for brokers and brokers.

For the distribution pressure, the “flight to high quality” refers to actions like conducting acceptable due diligence with purchasers, amassing the fitting info and information, and submitting full submissions to underwriters as a way to get the very best options – with complete protection and at an excellent worth – for purchasers. It’s about offering top-quality customer support and partnering carefully with purchasers and underwriters to find out and help appropriate danger administration mechanisms.

My query is: why aren’t brokers and brokers doing this on a regular basis? Absolutely, a “flight to high quality” ought to by no means be mandatory amongst distributors as a result of they need to all the time be appearing in the most effective pursuits of their purchasers. It pains me to assume that some – hopefully solely a really small minority of brokers and brokers – will not be assembly the specified “high quality” that purchasers and underwriters anticipate each day.

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There appears to be some variation within the “high quality” of submissions relying on the P&C market situations. Now, that is partly as a consequence of shopper demand – nevertheless it’s one thing that underwriters and distributors appear to simply accept. 

In a decent market, when underwriters are asking extra questions and demanding extra info, brokers and brokers should work significantly laborious to ship full submissions and safe enough protection for his or her purchasers. However in a gentle P&C insurance coverage market, the place underwriters are extra prepared to supply versatile contracts, excessive insured limits, and decrease pricing, there’s much less demand for brokers and brokers to file a high quality submission. They’ll get the protection their purchasers want, at a aggressive worth, with out offering pages and pages of data, after which they’ll transfer on to conduct extra enterprise. 

I believe that is problematic. Shouldn’t underwriters, brokers, brokers, and purchasers all the time try for high quality? And shouldn’t the business demand a high-quality minimal normal, whatever the cyclical market situations?

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I, personally, don’t assume the business ought to ever require a “flight to high quality”. That “high quality” must be the minimal normal, with common assessments to see whether or not the bar must be raised even larger. It will create constructive competitors amongst insurance coverage professionals, which, in flip, will maintain purchasers joyful.

Each insurance coverage firm (insurer or middleman) at the moment appears to be prioritising enhancements to customer support. In my view, it’s a disservice to purchasers if the actions of insurance coverage professionals are dependent available on the market situations. There shouldn’t be a “flight to high quality”; there must be high quality always. 

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