The long and winding road

ITIJ 203, December 2017

Finding a suitable underwriting partner can be a long, complicated journey. At some stage, most insurers will put together the inevitable ‘beauty parade’ of underwriters. With a wide range of choice and different operating models, how can you be sure that you have invited the right people in to pitch?

Each insurer will have its own specific set of criteria that its underwriting partner will need to fulfil, and many are so specific that they end up underwriting their own policies. For other insurers, it is more straightforward to use a broker, who will do the leg work to make sure that insurer and underwriter can forge a suitable partnership. 

“Core to our travel proposition is the ability to select the appropriate underwriter for our partners,” Paul Firkins, business development director at UK-based broker Hood Group, told ITIJ. “Different underwriters have different philosophies, and depending on our client’s strategies, one may be more suitable than another. This whole view of the market allows us to act as a matchmaker in a very focused manner.”
Carl Carter, deputy managing director of Voyager Insurance, which has relationships with 15 difference insurers, said that his company has a lot to consider when choosing underwriters for its clients: brand; customer profile; product type; financial stability; regulation; in-house or third party assistance; and whether the company is licensed to write business in a certain class or geographic region.
There are so many different aspects to a travel insurance policy, and with each insurer wanting to tailor its product to its customers, finding an underwriter who can ‘write to fit’, so to speak, is essential, according to Richard Smith, managing director of the UK’s tifgroup: “Look for someone who will give you a tailored product that will fit the demographic of your customers and your strategic aim.” Like Carter, he also highlighted the importance of financial stability: “We’ve all seen insurers who have come into the market looking for volume and price [their] product accordingly, only to exit the market again when they cannot make the product work.” Such companies, he said, reflect badly on the wider travel insurance sector.
Finding a niche
Avanti Travel Insurance in the UK specialises in providing cover for the impaired market, so its underwriting needs are slightly more complex than the average high-street company. Owner Glen Smith was adamant that Avanti travel insurance policies needed to be available to all, regardless of age, medical history, length of voyage and destination. While this insistence limited the choice of partners, these elements are a cornerstone of the company’s founding principle and a core base for the expansion of the brand. 
That said, it was not always an easy sell, according to Tracy Dennis of MS Amlin, formerly technical and compliance manager at Avanti, and many firms are understandably a little cautious of this market niche.
For Carter of Voyager, insurance benefits and limits are ‘rarely cast in stone’: “Because we design and manage so many differing types of travel insurance, this really does vary as to whether the product is a new one, whereby we need to ensure it and its levels of benefits are ‘fit for purpose’, versus whether it is a renewing product, which may also have certain minimum requirements for continuity reasons. In some circumstances, there may also be legal minimum requirements for cover; for example, in regards to ensuring a travel insurance product is compliant with Shengen visa requirements.”
Competitive pricing in this niche market can be difficult, and trying to find an underwriter that will offer the insurance benefits customers need while still keeping the policies affordable can be challenging. “Whilst it is essential for us to provide a great service, price is also important for our customers,” explained Dennis. “You will know the intricacies of pricing in your own sector and will push for fairness and transparency. For us, this meant that age bandings for pricing had to reflect real risk and be supported by actuarial statistics.”
Pricing of policies is an important factor, and one that takes careful consideration. It is important that the insurer understands the typical nature of business that the underwriter takes on, as Carter explained: “Some carriers focus very much on leisure travel insurance business, and in this sector they tend to, and need to, have a heavy focus on price. As such, in order to attain such a price, often the policy wording is very restrictive, as is their approach to claims handling. This type of underwriter, service and policy may be a great fit for direct-to-consumer brands, but may not be the best fit for a business travel or high-net-worth travel insurance customer.”
Given the nature of travel insurance policies, involvement in the product development process is essential for the insurer – any business wishing to offer a comprehensive policy with standout terms of cover will need an underwriter who knows its niche market and the individual requirements of its demographic, as well as the insurer themselves. Trying to stand out from the crowd in a packed marketplace means that making your product just that little bit better and the cover just a bit different could mean the difference between success and failure. The underwriters, then, must be open to new ideas and products and allow the insurer the opportunity to trial these based on the feedback from customers.
Carter told ITIJ that, at Voyager, it is ‘very important’ that the company has input in the initial product design phase, as well as having the ability to work with underwriters to modify and update policies in light of market events and changing customer needs. Adding gadget cover to travel insurance policies is one example of where customer requirements change with the times, and insurers should be meeting the need for more insurance for the devices that are now routinely being taken with customers on holiday.
Paul Firkins agrees that product benefits, limits and geographical restrictions are less of an issue these days for the core UK travel product, and that flexibility and innovation are actually more pertinent to the decision of which underwriter to choose. “More important,” he told ITIJ, “is an underwriter’s willingness to work to innovate and quickly react to market and distribution opportunities as they arise. One key factor when working with brands is the need to protect and limit any damage from negative publicity. Being harsh on claims may be the way some underwriters keep marginal aggregation business profitable, but our current and future partners are very keen to ensure policies are well constructed and customers are treated fairly, even if this means higher net rates.”
We’ve all seen insurers who have come into the market looking for volume and price [their] product accordingly, only to exit the market again when they cannot make the product work
The ability to move fast when events require, said Smith of tifgroup, is important, as customers need the reassurance that their insurance policy will meet their needs. If the policy has been correctly priced in the first place then flexibility is much easier to achieve, and Smith recommended that insurers talk to their underwriters to understand how to utilise root cause analysis from all aspects of customer interactions, which will allow continual improvement of the policy.
Going solo
There are plenty of insurers who choose to underwrite their own products, whether because they were unable to find an underwriter to meet their needs, or because it makes the process of designing and launching a bespoke product more straightforward. Allianz Global Assistance USA has chosen this route, but not exclusively, as chief product officer Robert Cavaliere explained: “While we have a primary insurance company that we own and manage directly, we do have long-term relationships with other underwriters. In any instance, for us, the most important criteria is the availability of compliant customer focused benefits and policy forms. We want to drive the market and ensure travel insurance meets customer needs long term.”
Craig Morrison, travel insurance industry veteran, offered his (somewhat colourful!) worst-case scenario for what can happen when an insurer chooses the wrong underwriter to the detriment of the consumer: “A customer buys a UK travel insurance policy from company X, and doesn’t notice in the fine print on the back of the policy that it’s underwritten by insurer Y. Customer submits a claim, the service sucks, the usual bastard insurance company trying to delay, defer, obfuscate, ask questions, then ask more and different questions, anything to get the customer to surrender. Next time, customer buys from company A, and doesn’t realise that the underwriter is the same exact insurer that gave them the run-around on the first policy! That’s not good for the customer, and it’s certainly not good for our industry.”
Kelly Coombes, regional head of group personal accident and travel in Europe, the Middle East and Africa for AIG, spoke to ITIJ about why the company chooses to write its own policies: “Underwriting our own products gives us the flexibility and freedom to continually develop and improve our products. We are passionate about meeting and exceeding the expectations of our customers, so it is essential that we are able to adapt our products to keep up with their rapidly changing lifestyles.” She went on to explain: “Owning the whole process from design to delivery means that we can be nimble when we need to be – the key for any company underwriting this sector is having the ability to react to world events quickly.” And keeping everything in-house can bring benefits for the whole travel insurance process, from sales to claims: “Our insurance, assistance and claims teams all operate under one roof, which allows us to offer our customers the seamless support they need.”
The seamless service that can be offered to customers as a result of not having to consult any other parties when it comes to claims coverage and payments can drive customer retention rates and loyalty in a positive direction, according to Morrison. “Being the underwriter absolutely speeds up claim payments,” he said, “mostly because the decision making is completely controlled by one company. It can mean an average claims turnaround time of three to five days. And a company can make ex-gratia payments for losses without receipts (no-one has receipts for shoes, underwear etc). In other words, the loss ratio is just one company’s problem, and there’s no worry about an underwriter needing more margin at the end of any contractual term, therefore either a) forcing us to cut commissions, b) forcing an insurer to raise prices, or c) both!” 
Match made in heaven
Compatibility is key to any successful relationship, and the same rule holds true for the one that exists between insurer and underwriter. For a partnership to be successful, Tracy Dennis explained, there has to be a mutual recognition of what’s important. Customer satisfaction equals loyalty, and in a notoriously disloyal sector, making sure your customers come back year after year is vital. Without a good underwriter that will work to enhance the customer experience, this is impossible for an insurer to achieve. “Ultimately,” she said, “we made the decision based on the service that would be provided to our customers. You have to be satisfied that the promises made by the underwriter during tender discussion would be delivered throughout the term of the contract. There may be difficult discussions along the way, but with core compatible values, be secure in the knowledge that the best outcome for the customers is at the forefront of concern for both parties.”
making your product just that little bit better and the cover just a bit different could mean the difference between success and failure
Ultimately, said Firkins, the goal of a broker is to create long-standing relationships that are profitable for all parties. 
This process is not a one-way street. Underwriters will have their own agenda and criteria for selecting a partner, and insurers have got to be prepared for the matchmaking process, with legal and financial documents prepared and ready for delivery when requested, a prospectus with all company information readily available and, importantly, detailed plans for future growth, marketing, advertising and development activity. It is only through open and honest communication that a long-term partnership will prosper.

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