Uncertainty Mark-up for Catastrophe Coverage

Uncertainty can prove costly when it comes to purchasing property insurance. When pricing catastrophe risks, underwriters must be able to quantify them accurately. Where uncertainties arise, underwriters often adjust prices in an attempt to compensate for the unknown or decline the risk entirely. Uncertainty also tends to drive up the loss estimates produced by CAT modeling tools used to help underwrite property coverage today. To avoid paying unnecessarily high prices, insureds should provide detailed data that creates a complete and accurate picture of their exposures in a schedule of values. Complete submissions based on more precise data are likely to receive a warmer welcome from underwriters who have seen an increase in submission volume in the current market. Brokers that can provide a detailed catastrophe risk assessment report using the latest modeling technology can help clients make more informed decisions about risk transfer strategies and better position them to achieve the most cost-effective insurance program.

Learn about CRC Group's CAT modeling tools and processes, and why the company is uniquely positioned to give you the edge when it comes to property risk.

Featuring: 

• Colin Morris is a Senior Risk Analyst with CRC Group’s Red Bank, NJ office.
• David Pagoumian is the President of CRC Group’s Red Bank, NJ office. David specializes in property placements and is an active member of the Property Practice Advisory Committee.

Visit REDYIndex.com for critical pricing analysis and a snapshot of the marketplace.

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Transcript

Dan Wentz: 0:23

uncertainty and property insurance don't go well together. Fortunately, there are tools that exist that can help you alleviate the uncertainty. Today we're talking cap modeling tools and how to avoid the uncertainty markup for catastrophe coverage. We're joined by Colin Morris who is a senior risk analyst with CRC group's Red Bank, New Jersey office. And also in that same office, David Patagonian, who is the president of CRC group's Red Bank, New Jersey office. He specializes in property placements, and is an active member of the property practice Advisory Committee. Coming up next, we get rid of the uncertainty with property placements. Welcome to the placing you first podcast from CRC group. I'm your host, Dan Wentz. And this podcast features news and insights from CRC group's vast knowledge base of 4300 plus associates who right in excess of $23.5 billion of premium annually, and we're giving you insider access to what's happening in our company and the types of insurance we place. This is the placing you first podcast. Okay, so we're talking about catastrophe coverage today. And the uncertainty markup that comes with catastrophe coverage. And I think that's our first question is, David, what exactly is uncertainty markup when it comes to placing catastrophe risks,

David Pagoumian: 1:38

unfortunately, it's basically somewhere down the line, someone not getting the work complete on what would be considered a, a well fabricated statement of values for property insurance placement purposes. You know, good address information, good construction data going deep on roof information. These are the basic push ups and sit ups that our industry has been talking about for years. And so we feel that there's still opportunities to push continuing to talk about it. In fact, then we're even going further with that with with your efforts in the team on the SOV fixer that we're building that a retailer sends us a statement of values, we put it through the machine, it helps get it in good order, we pass that back to them, ask them to help complete it. And that's the process that we do to you know, minimize that uncertainty. So I know it sounds silly, and some things in life do sometimes. But it's really just the basics of our business, getting good data into the machines, the underwriters, and their managers are not accepting, we just don't have that information anymore. They're just not accepting that. And rightfully so they their value and how they price risk is all connected to the data they bring it.

Dan Wentz: 2:58

And that's, you know, that's that's where we're the world, I think, at large is that right now is if you can quantify something, we're going to capture the information, we expect to see it because the tools exist now, you know, the internet's a thing, data is a thing. So we've got to use it to our advantage. Why is it so critical to getting the best price on your coverage having an accurate representation of what the risk actually is?

David Pagoumian: 3:25

Well, there's two sides to that the client wants to know what their true calculation of risk is, right. So as an advisor for a specific class of business, you want to be able to, you know, come up with benchmarking on where the catastrophe limits should be where the, the, you know, the burn limits are and in that you need good data to be more to have more predictability. On the other side, the underwriters can't deploy capital unless they have proper data that aligns with their metrics. So, again, basic stuff that we're all holding ourselves all accountable for, as an industry. You know, obviously, our group is sort of on the frontier of that with the SOV fixer, and obviously the I love data campaign that started years ago. And so certainly very great stuff happening, but good basic stuff.

Dan Wentz: 4:16

And I was I was reading in the report that some underwriters actually will decline risks if they don't have enough information, right? I mean, that's, it's in your best interest to include all that info.

David Pagoumian: 4:27

Because now they have more choices. Now they have more choices of accounts that to have that business. And if you don't come to the show, with with with your good information, you're not going to be let in, or you will you will, but you know, they'll give you you know, the far out pricing, there's categories to pricing on the riders now have loaded capital for that, you know, a deal like that return Sure, we'll do those all day long. So correct the data, better pricing.

Dan Wentz: 4:54

Alright, so let's talk about getting that data and displaying it showing it a Colin is our mastermind behind these risk assessment reports that CRC group provides. Colin, can you talk a little bit about what is the risk reassessment report is and what it provides?

Colin Morris: 5:10

Absolutely. So basically, our risk assessment reports were created to basically you know, provide our brokers with a sales tool that you know, they can provide then provide to their retailer are insured. And, you know, use it for a number of different ways. Sometimes it's getting their foot in the door with a new retailer, or if it's, you know, solidifying an existing relationship, we see a lot of times where we'll get the same account year over year, because the retailer or the insured becomes accustomed to receiving it. And they, you know, obviously see the benefit in it. They're basically they're created using the data provided to us in the statement of values that Dave alluded to, before that data is then cleansed and prepped for the for the cat models, we utilize both AR and RMS just to again, provide our brokers with a complete view of you know, sort of the risk appetite that's out there, some markets may be RMS heavy, some markets may be AR heavy, some may abuse a blend, so we're just trying to, again, provide our brokers with as much information they can, that we can, you know, essentially, I always like when I'm on a call with with a retailer or an insured. And our brokers, I always like to say that our risk assessment sort of tells the story of a particular account, we'll begin by identifying all the underlying primary code information, your construction, your occupancy, the exposure of where it is, and you know, the small sort of primary steps, or pieces of what goes into the account, how much it's worth where it is. So once we present the sort of who, what, when, where, why of it, then we show our results, and you have sort of some context as to this is what the account was how we analyzed it in here, and now the results. So you know, we're just really trying to, again, provide our brokers with with a sales tool that they can use in a number of different ways.

Dan Wentz: 7:02

Yeah, so I guess this would, you know, this is a tremendous benefit to the insurance, right? Can you talk a little bit about that, how that helps them?

Colin Morris: 7:09

Sure. I mean, again, I think the insurance can use this in a couple of different ways. If their their data is good, and they're have good faith in it, they can use those results and have a really good idea of of pricing as to, you know, where how much limits when they may need to buy or, you know, sort of where they may fit in a different program structure. On the flip side of it, if if there's glaring holes in the data, and the report sort of shows that they can come back and say, Oh, wow, we need to sort of up our game here, maybe it's worth having some of these properties inspected, maybe one of the locations is really driving the results. And maybe they want to sort of carve that out and place it somewhere else that you know, there's there's a number of different ways that it can be used by the

Dan Wentz: 7:48

insurance. It's like the old GI Joe, quote, knowledge is, is half the battle, right? So if you know what your your risk is, and you can see it, you can Yeah, negate it, you can, you know, change your pricing by including things, not including things, updating things. So that's pretty powerful. That's great. What about so these, you know, the error reports, the RMS reports, so it's it's been industry standard for a while, I would think our underwriter is now asking for more information, just beyond what is being put out? Are they getting more detailed in their assets on accounts? And either Colin or David, you can answer this, whoever wants to?

David Pagoumian: 8:27

The answer on that is yes. There's always specific, deeper dive questions that are a result of certain classes of business could be high hazard manufacturing, particularly on the fire side. So the model just acts for natural catastrophe perils, right. So there's obviously the whole fire aspect as well. You know, regarding your comment on the knowledge part of it, you know, I read a while ago, about 10 years ago, that we were entering this knowledge economy, right. And it was these teams that had good knowledge, and how to deploy that knowledge. And, you know, you hit the nail right on the head, it's the knowledge of understanding how on the writers model, what information goes into how they model it, and what are the risk calculations? What are the results of that model? And how does it affect your warehouse debt is pumping, you know, 50% of your BI exposure through that you're pumping 50% of your BI exposure to and if that got hit with that Armageddon scenario look, like, being able to bring that at a table with a client eliminates a lot of their late night concerns, right? You know, I have a great insurance program, this insurance broker explained it to me very well got the right limits, you know, good policy form. And so you bring that knowledge and then also sharing it and making it fun when the customer starts learning about how long the writers are going to price risk, it becomes a lot easier for us, we're we're not selling anymore, we're facilitating and as distributors, you know, we are in the distribution channel. So as distributors as we take the friction out of there, you know, that that's why, you know, Colin does come from a point of view of, you know, how we use it in a sales process, but, you know, it's a natural sales process. I don't want to suggest that it's not a differentiator anymore, because it all rather it's just executing the basics better than your competitors. That's what it's coming down to, you know, a football team plays other football teams that are very similar, right? The teams that execute better are the ones that win.

Dan Wentz: 10:32

Absolutely, David. And that's a, you know, it's a it's a super valuable tool. And CRC makes it easy. Maybe calling you can tell us how does you know how does an agent get started with this? What is the the easiest way? And feel free to plug CRC group in your answer?

Colin Morris: 10:50

Absolutely. The easiest way is for an agent to go to their CRC broker. Across the country, we have many foreign property brokers. And those brokers I've probably done a report for at some point in the past, if not hundreds already. So most of our brokers are pretty well in tune with the process. But we do have a dedicated email box property reports at CRC group.com. And brokers will send the requests in there, along with you know, the most up to date. SOV, that's probably one of the more important pieces obviously, along with a list of any perils they want, you know, we run everything from named wind to convective when including tornadoes, inland flood, earthquake, obviously, terrorism, wildfire, the list goes on. So we have a lot of capabilities with both AR and RMS. So you know, a list of the perils they want run any deductibles, or limits or layers they want included any of that great stuff. And once it's in our system, I get it onto our queue and typical turnaround time, probably about 24 to 48 hours. Wow, quick, yeah, we've increased our efficiency every single year since we've started this, and we're about seven years into the process.

Dan Wentz: 12:04

So we've got a successful track record, if you will, of running these reports, turning them quickly, and getting people the data they need to succeed. Did we miss anything? Guys? You did,

David Pagoumian: 12:15

Dan, you missed that if if you added the specifications for a deal, the limits and the coverage being sought. And you also added the loss history. And the risk assessment report, your submission would be complete. So said differently. The reports that Colin and his team provide for us, we utilize as almost completing our submission, it completes our submission by 80% to the market because the markets getting a good summary of risk. And they're able to speak to their management at the coffee tables and saying look at this nice summary of risks that I have here is this one that we want to move forward. So we're able to know pretty quickly whether or not something's going to move forward or not. And that is a whole separate podcast if you want to talk about speed in this business,

Dan Wentz: 13:01

oh yeah, puts it to the top of this submission box when they see a nice clean submission and they know that the CRC brokers are going to be sending that over to them. We've got a reputation for that. So in summary, if you're writing catastrophe risk, you need one of these reports right? So get with your CRC broker, you can find one online at CRC group.com Search for producers. We've got a handy dandy database up there to find someone near you who writes the types of business you're dealing in and they can help you out. Well, David, Colin, thank you very much for having me. Cast today. Hope to talk to you guys. Yeah, hope to talk to you guys again soon.