Old-School vs Modern Underwriting

Historically, a business typically had a straightforward description.

• A plumber installed plumbing systems.
• A builder built houses.
• A retailer sold products from a shop.

Underwriting these risks was relatively simple because the trade description closely reflected the actual exposures presented.

Today’s SMEs are far more complex – we have seen a risk across our desk this week which the Composite market e-trade systems declined because they couldn’t deal with the various facets of the SME wholesale risk. It included an element of R&D exposure for an emerging product into what on face value was high risk sectors.

There is no doubt that e-trade has transformed the SME market. It has delivered efficiency and accessibility for brokers and customers alike. Straightforward, low-hazard risks can often be quoted, bound and serviced within minutes.

However, e-trade works best when risks fit neatly into predefined parameters.

The challenge arises when a business falls outside those parameters—or perhaps more accurately, when its true exposure is not fully reflected within them.

A purely digital process may decline the risk or apply broad-brush pricing assumptions. A human underwriter can interpret the information and arrive at a more accurate assessment.

The principle of reviewing every risk on its own merits remains as relevant today as it has ever been.

Individual underwriting enables better risk selection, more accurate pricing and greater flexibility. It allows insurers to distinguish between risks that may appear similar on paper but differ significantly in reality.

Importantly, it also enables underwriters to support brokers and customers whose businesses are evolving.

SMEs are entrepreneurial by nature. They constantly adapt, diversify and seek new opportunities.

This is not an argument against technology by the way……far from it.

In many ways, the more sophisticated technology becomes, the more valuable physical  good old fashioned Brokering and underwriting expertise becomes alongside it.

Because in a world where no two SMEs are truly alike, there remains no substitute for understanding the story behind the risk and that’s where brokers can really add further value in “selling” the risk to an Underwriter.

So in summary it’s a plug for going back to the Old Skool (school) underwriting wise!!!

Written by Lead Underwriter Simon Bell.