Looking beyond the trade description

Recently, we reviewed a wholesale business that, at first glance, appeared to fall outside standard SME underwriting parameters.

The company supplied products into sectors often regarded as high hazard and, in addition to its core wholesale activities, was investing in the research and development of an emerging product.

Viewed purely through a trade description, the risk raised several questions. Unsurprisingly, it fell outside the appetite of some automated trading platforms that were unable to accommodate the various elements of the business model.

However, a more detailed underwriting discussion revealed a far more nuanced picture.

By working with the broker to understand:

1. The nature and scale of the R&D activity
2. The controls and governance processes in place
3. The business’s revenue split across activities
4. The industries being served
5. Future growth plans and exposure management

We were able to build a more informed understanding of the risk.

Rather than relying on broad assumptions, the risk could be assessed on its actual merits, allowing for a more accurate underwriting decision.

What this demonstrates

This example highlights a growing challenge in today’s SME market.

Many businesses no longer fit neatly into one box. A simple trade description can overlook significant detail and may not accurately reflect the true risk profile of the organisation.

Technology plays an important role in helping insurers process straightforward risks efficiently. However, when businesses evolve, diversify or innovate, underwriting expertise remains invaluable in identifying the difference between a risk that falls outside a system’s parameters and a risk that genuinely falls outside appetite.

For brokers, it also reinforces the value of telling the complete story behind a client’s business.

A detailed underwriting conversation can often uncover information that enables a more appropriate assessment than a standard application alone.