Zurich like many other carriers who desert underwriting by classification,and play the Cash underwriting syndrome,wherein its'”how much do you need to get the order”is now returning to S.O.P.after learning the hard way that one cannot deviate from writing according to the risk’s exposure in favor of the cash game;Note that Zurich’s CEO is still emphasizing”The bottom line”in his remarks, with little detail as to what specific steps they have taken underwriting-wise to cut losses. As I have always maintained “you cannot do it by abandoning stringent long time underwriting procedures.”I wonder how much time will pass before they revert to the foolishness of cash flow underwriting.
Joe, they will return as soon as they get profitable again. I’ve seen it many times. Phase 1: grow the book, get it done. Phase 2: A line, say auto, starts going bad, but other lines are performing OK. Result, the good lines subsidize the bad line. Phase 3: Good lines start underperforming. The “leaders” decide to focus on the SIC codes or Classes having the losses. The decision is to limit the writings and non-renew the those classes. Phase 4: Results continue to be poor. Across the board rate increase are announced and instructions sent out to run off business with any sort of problem. Phase 5: Stand firm on rates and classes until desired results are realized. Phase 6: See phase 1. And so it goes, with one exception. The “leaders” announce that “we will maintain underwriting pricing discipline while seeking growth and profitability. The fly in the ointment is that the growth goals are usually unrealistic, so the local “leaders’ begin to cut rates so they will make the goals and EARN THEIR BONUS!!!!
Zurich like many other carriers who desert underwriting by classification,and play the Cash underwriting syndrome,wherein its'”how much do you need to get the order”is now returning to S.O.P.after learning the hard way that one cannot deviate from writing according to the risk’s exposure in favor of the cash game;Note that Zurich’s CEO is still emphasizing”The bottom line”in his remarks, with little detail as to what specific steps they have taken underwriting-wise to cut losses. As I have always maintained “you cannot do it by abandoning stringent long time underwriting procedures.”I wonder how much time will pass before they revert to the foolishness of cash flow underwriting.
Joe, they will return as soon as they get profitable again. I’ve seen it many times. Phase 1: grow the book, get it done. Phase 2: A line, say auto, starts going bad, but other lines are performing OK. Result, the good lines subsidize the bad line. Phase 3: Good lines start underperforming. The “leaders” decide to focus on the SIC codes or Classes having the losses. The decision is to limit the writings and non-renew the those classes. Phase 4: Results continue to be poor. Across the board rate increase are announced and instructions sent out to run off business with any sort of problem. Phase 5: Stand firm on rates and classes until desired results are realized. Phase 6: See phase 1. And so it goes, with one exception. The “leaders” announce that “we will maintain underwriting pricing discipline while seeking growth and profitability. The fly in the ointment is that the growth goals are usually unrealistic, so the local “leaders’ begin to cut rates so they will make the goals and EARN THEIR BONUS!!!!