RUNNNG HEAD: STRATEGIC UNDERWRITING 1

Strategic Underwriting

Student’s Name

University Affiliation

Due Date
Strategic Underwriting 2

Table of Contents

Explain the relevance of the insurance value chain for this insurer briefly ................................... 3

The relationship between each of the critical strategic underwriting issues, the underwriting loss

ratio target and the insurance value chain ..................................................................... 6

Recommend improvements to the insurance value chain to meet the underwriting loss ratio

target ............................................................................................................................. 10

References .............................................................................................................................. 14
Strategic Underwriting 3

Explain the relevance of the insurance value chain for this insurer briefly.

Just like the political environment the insurance sector is facing unpredictable future

scenery. To remains relevant insurers need to fully develop strategies and vision to combat the

external pressures the industry is facing or they will quickly lose relevance. With the aid of a well

elaborated insurance value chain insurance companies will remain relevant.

Low interest environment created by the insurance company is driving capital and

competition into the industries. Between the years 2008 to 2016 insurance capital flow

increased significantly. The insurer is able to reap big profits from the advantages created by

the value chain. The future of insurance value chain is digitalized, the insurer is able to learn

and acquire new technology to adapt to the change and connect with more consumers.

Insurers who embrace digitalization enhance services offered leading to accuracy, and

providing real time solution to consumer’s needs. The entry of traditional players forces insurers

to evaluate their place in the value chain. Measures will require insurers to adopt value addition.

Since 2008 more than $250 billion in capital has circulated due to the global insurance industry

making the environment more competitive. By exploiting available data insurers will understand

risks and add this knowledge to become more successful.

Through direct capacity entering the value chain insurers grow their income. Key players

enter into partnerships particularly with firms excellent in customers experience for instance the

partnership between Munich and Whisk. External threats originating from traditional players in

the insurance market must be understood by the insurer. All these information is visible in the

value chain. All players that exhibit traditional ways of handling tasks purchase insurance from

established entities and give out to insurers on behalf of host organizations.

The consequence of insurers failing to expand their services towards the customer has a

direct relation with the capacity of the value chain and competes favourably with other players to
Strategic Underwriting 4

remain relevant in their own territory. For the insurer, increased interaction with the customer in

the market presents the biggest opportunity in the commercial market, by increasing the

customers who are willing to purchase insurance covers online without any advice.

Partnership between insurers and the internet reduce the chronic shortage of interaction

with customers. Increasing partnership with technology provide value addition completing the

original traditional products by giving a new look and increasing frequency of customer and

insurers interaction. Other player take the use of technology even further by protecting all

aspects of their services to the technology product sold.

All retailers have set a high bar in perfecting customer experience, insurance value chain

is relevant in providing superior customer experience exploring how to leverage big data and

make access flexible meets the current and future needs of insurers, through the value chain

exploiting new channels that keep technological developments on top is key for intermediaries

looking to deliver best customer experience. Engaging various mediums like amazon can fasten

success.

Investment in the insurance industry brought about by knowledge of the insurance value

chain has tripled from 2015 to reach an all-time high of $16.5 billion. The change has intensified

competition and knowledge sharing among players and heightened the threat to all available

traditional players. The insurance value chain has made all this possible for the insurer.

Insurance distributors focus on customer distribution and interaction part of the vale chain which

needs less capital. Competition and positive cooperation between major players increase their

position in the value chain and actively work with incumbent insurer to increase customer

experience. The next couple of years we expect the market to be more competitive particularly

with insurers who establish and implement strategies to survive in the complex and ever

changing environment.
Strategic Underwriting 5

The most successful organizations will add the most value to all potential customers. In

many scenarios where value chain binds it can all over sudden become chains that unwind. All

insurers want to understand what to write, where and how best to approach the dynamic

market. Product development and accurate pricing followed by strategic underwriting is the best

channel for insurers to adopt. Down the value chain from underwriting are policies and

management. Policy holder satisfaction is the final link in the insurance value chain.

Performance towards achieving the goal helps answer the two main questions of how the

insurer decide on which insurance coverage to apply and serve and secondly, how related risks

can be better understood and managed.

Many insurers use very catastrophic models to analyze pricing, risk selection and

relevant underwriting model output models provide information about potential losses before the

happen so that insurers can prepare and limit any potential financial losses. Related advantages

are visible in managing claims. Insurers can speed up payment of claims and spare time to

investigate claims that seem questionable. Short term strategies only handle immediate

challenges; insurers should only consider long term horizons.

In the insurance value chain market growth presents the biggest challenge. Finding

solutions that increase premiums should compose the first step. Insurance carriers should price

market segments they currently do not engage to achieve a competitive advantage and

maintain adequacy. For instance, organizations can narrow down their emphasis to the expense

ratio on the value chain and lose focus on profitability. Through advanced underwritings tools it

is possible for insurers to manage appropriate customer retention and improve their financial

performance.

Within the insurance value chain, market growth is the biggest challenge. Discovering a

solution that increase premiums reflects the risks in the company forming the first step. Many
Strategic Underwriting 6

insurers require analytical solutions that supplement lack of data .The level of sophistication

forces the insurers to merge data for homeowners and other businesses. The involvements of

insurance value chain help insurers determine risks across all lines and change the industry

when fully developed and further strengthen the insurance value chain.

Analyze, based on you explanation, the relationship between each of the critical

strategic underwriting issues, the underwriting loss ratio target and the insurance value

chain.

As the millennium progresses the pricing, delivery and design of products evolve to meet

customer needs and generate more sales. Underwriting must become part of the process.

Things change more than they did in the 20th century and factors affecting the change include;

ineffective use of data in supporting the underwriting process, inefficient sales and claim

operating function and finally inappropriate reinsurance programmes. There is a long and strong

relationship amid the 21st century strategic underwriting issues, the underwriting loss ratio and

the available insurance value chain. This paper analyses the above concerns.

Ineffective use of data in supporting the underwriting process

The mode used to underwrite, prevent selection and how to make available products at

cost effective prices. Old ideas like insisting on physician reports on medical impairment have to

change to be able to thrive in the 21st century. The existing models that were used in the last

quarter were driven by a combination of hybrid entities. Companies are moving away from

having incompetent providers and they arrange to use the internet and phone rather than having

it done by technicians. Revenue generated by insurers is for two major reasons namely;

premiums paid in advance and time lag in many aspects .Data on Factors that generate income

for insurers vary in relation to many aspects ranging from the claim settling lag time to consumer

satisfaction. For property owners compensation applications need to be cleared fast to help
Strategic Underwriting 7

reduce losses on assets. Insurance settlements are suspended under liability lines and permit

the insurer to hold the premiums for an extended period of time. This is made possible by

having backup data to give a clear picture of where the organization went wrong and how

positive adjustment can be made.

Having proper documentation for all insurance agreements is an all-time good idea all

insurers should prioritize leaving the challenge of anticipating circumstances as the only

difficulty faced by insurers. As a business develops it becomes hard to predict whether the

underwritings will have any impact. Due to inadequate communication platforms between those

selling and recruiting insurance agreement, underwriting claims and processes face numerous

challenges. Most employed underwriters have little or no knowledge of reinsurance agreements

due to ineffective use of available data that support the underwriting process.

Clients can greatly benefit from information and all day access to services accompanied

by on time delivery of all consumer needs. Putting together a robust value chain facilitates

access to information from all coordinators through organised arrangements and knowledge

build up in all underlying business opportunities. Managers are able to see the future and place

strategic plans to help come out of the situations if they arise. Value chain matrix and data is a

source of cost and value differentiation. Esteem chain illustrates all important information

including all processes implemented by an institution with the aim of making profits and

achieving set goals. For example, managers can use data from sale of stock to control all

techniques applied in available processes, advocate for new incentives and come up with plans

to improve the position in the markets and outdo all competitors.

Inappropriate reinsurance programmes

The selection of appropriate insurance portfolio forms a management dilemma for many

insurance companies. Earlier efforts to merge underwritings profits with investment outcomes
Strategic Underwriting 8

involved the development of target returns acquired to achieve maximum returns. Once the

target margin is set the investment income is easily predicted and an obligatory underwriting

profit is established. In case of any difference associated with the benefits, different insurers are

brought on board to give clarity. It is important for insurance companies to create rules and

guidelines into reinsurance contracts and how the underwriting process should be undertaken.

Target loss ratio defines anticipated revenue collected with the relevance of employees

benefit plan. Most significant amounts of cash paid by insurance firms and any additional

payment results in loss of money thereby increasing annual renewal costs. Most insurers today

keep the target loss ratio details away from potential customers. To maintain an efficient

portfolio insurance companies have several options to use for maintenance of the relationship

between each of the critical strategic underwriting.

In today’s world customers can track their insurance packages through the internet and

perform empowering plans via the same platform. Through the internet Customers can uncover

new products by getting relevant and latest information they require to make up their minds

about a product. Regardless of the customer’s location, the internet gives help and adds more

influence to clients and improves quality in the very dynamic markets. Clients can recognise the

composition of products and differentiate genuine from counterfeit products in the insurance

market with the help of the value chain assessment. With the internet appropriate reinsurance

cover can be selected and more information provided for potential clients to select.

The current insurance industry enacts positive advancements through information

development and examination of additional operational advancements. The internet plus

information investigation through research drives change towards the realisation of hazards and

work towards elimination of challenges. Through backup creation insurance companies are bale

to differentiate themselves from other major market players. Policies are directed towards
Strategic Underwriting 9

improving the new advancements adopted in the market structure after assessing the insurance

value chain which produce more straightforwardness and additionally improving direct channels

inside the insurance industry.

Inefficient sales and claims operating functions

Through asset allocation, revenues spent on acquiring assets are important when

determining long term performance of any insurance company. To achieve a successful

investment, personal long term financial goal is vital. Collection of revenue over time will shift a

portfolio from target allocation hence presenting a risk. Consequently, investment strategies

rebalancing used by insurer maintain target risks and increase revenue collection. In the

insurance sector cost matters and clients need to pay attention to advice to increase portfolio

efficiency. It has been noted over the years that implementation of mutual funds has a

significant effect on overall expenses due to inefficient sales and claims operating functions.

Taxes paid to the government need to be maintained whether an insurer runs into a loss

of make huge profits. This will take a large portion of the current portfolio. To preserve yearly

taxes, insurers can implement tax loss harvesting strategies, allocate resources on time and

equally. Finally, execute withdrawal strategies in case of retirement. To achieve proper

management; investors must maintain a long term relationship with customers through

discipline methodologies via daily market interactions through systematic sales and well

established operating function.

Insurance value chains contain advertisement investigation, customer examination

details and all gainful amusements realized during all operations. 21st century commercial

undertakings incorporate arrangements, advancements and development. The implementation

of insurance value chain guarantees a smooth claim process and significant progress in
Strategic Underwriting 10

technology being incorporated into the insurance business. By showcasing all relevant

information, clients benefit and are inspired to exhibit call focus advantage.

Insurance companies can create a capacity where viable activities get supplemented by

commercial dedication to limit the stage where insurers build market space for their distinct

products offered to esteemed clients. Factors affecting their operations as stated earlier include;

ineffective use of available information and data in supporting the underwriting process,

availability of inappropriate reinsurance programmes that do not have clients interest at the top

and inefficient sales and claims operating function that will ease access to insurance cover .With

the use of technology, provision of cost effective services to customers as indicated in risk

underwriting strategy and governance of 2015 strategic underwritings would be successful. All

organizations need to have an underwriting paradigm shift that permit access to relevant

services, and information. As time progress into the future, attention is shifting to the young

population on how to achieve risk management behaviour. Via a sophisticated insurance value

chain, organizations guarantee claim process improvement and acceptance of any losses

incurred in operations.

Recommend improvements to the insurance value chain to meet the underwriting

loss ratio target.

Strategic underwriting streamlines operations of safety and insurance companies while

increasing customer relation. Improvements in the value chain to meet respective underwriting

loss target is the number one priority to several insurance organizations, for this reason

recommendations to improve the value chain can be highly appreciated by all involved

individuals. Evident contrast between all virtual and real insurance value chain is the cost. Some

of the improvements relevant for the 21st century insurance value chain to meet the underwriting

loss ratio target include the use of a backup plan for all insurance organizations. With a backup
Strategic Underwriting 11

plan all relevant information can be accessed at all times and with ease. Insurance value chain

involves use of several data when working towards meeting the underwriting loss ratio target.

For a long time insurance organizations have automated operations within their systems

to include less capacity when selecting the right value chain. The focal point for several players

is geared towards investigation of new automated processes that reduce hazards experienced

in the day to day operations. Insurance officers need to use mobile strategies like property

evaluation machines and computerise all activities in order to automate the utilization of

blathers. With the emergence of insightful frameworks and backup plans, insurance companies

have started experiencing ease in all functions and methods applied towards achieving set

goals.

Necessary structures and facilities require responsible leadership capacity to

consistently keep up to speed with information from all sectors, ranging from the clients, and

response about service provision to giving a better pay for excellent work. The utilization of

insightful frameworks to investigate all information on property assessment, and finally

validation of received data can go a long way in helping insurance companies. Although

insurance underwritings spends up to seventy dollars to conduct a research on any acute

disease this paradigm needs to change. New strategies that positively affect many people will

help eliminate old fashioned underwriting tools and apply new and modern tools.

Recruitment of Qualified staff and personnel is also an important step insurance

companies can take towards achieving the expected paradigm shift. Outdated employees who

are slow to act and reduce the performance of such organizations should be left out in all

operations, new and energetic personnel should be brought on board if the realisation of goals

in to be achieved. If any changes are to be implemented, priority should be given to permit

underwritings of historical records and using knowledgeable questions. Implementation of

Strategic Underwriting 12

property and casualty back up plans has significantly changed property evaluation and

utilization of all monetary procedures in overseeing between all relevant parts.

Customers need to be equipped with productive and readily access all essential

confirmation procedure, fair threat evaluation and full capacity when it comes to safety net

provision. Update on the administrative capacity while improving cost efficiencies will help

insurers combine data gathering equipment’s alongside a broad and manageable system

capable to handle difficult situations of the customers in any business field. Insurers need to

assist clients fasten their advancements in getting to emerge as the most preferred businesses

in the ever dynamic and competitive markets. Experience allows customers to get out of their

way and create an advertisements opportunity to serve clients request.

Exceptional programs relating to web share should be a priority to all insurers of the 21st

century. To meet the underwriting loss ratio such improvements to the insurance value chain

needs to be adjusted with immediate effect. Through advertising and product awareness

creating goals can be achieved with ease. By combining all gathered data alongside a broad

system of partners to handle difficult situations this will facilitate cost efficiency. Helping clients

fasten their advancements in acquiring the preferred business in the market and collecting all

necessary documents to see the success, individual dedication and research needs to be

conducted on regular basis.

Businesses with experienced personnel allows their customers to get out of risks and

create a favourable advertisement platform that serves the interest of all clients upon request,

therefore frequent teaching and capacity building is very vital. Exclusive seminars and

conferences can help equip insurance organization with the much needed ability to handle all

situations that may arise from daily operations. Embracing change can at times be difficult for
Strategic Underwriting 13

many, but the use of incentive like seminars, allowances and promise for promotion to all well-

equipped employees would motivate more and more capacity building among relevant players.

Information technology streamlining in the insurance sectors helps companies and

organizations in achieving strategic underwritings. This is possible by making available stable

internet connection to help clients acquire relevant information while within the organization

premise and having a twenty four hours operating website where all questions and information

can be acquired. Organizations like IBM have changed the way the insurance sector operates

making clients more efficient by assisting in making sound and educated choices and taking

part in coordinated activities.

Last but not least, Application of restrictions can as well help achieve target loss ratio;

forwarding any data from one platform to a third party via a second network may compromise

the information. In the event that transferable and sufficient amount of data is to be shared an

analysis and coding should be utilised to help curb any eventualities. To improve target loss

ratio, organizations need to recognize customers’ needs to reduce the amount of cancelled

recovery and help in detecting any instances by decreasing investigation periods. Gaining an

understanding of all consumer claims using a predictive modelling to analyse both structured

and unstructured request will help meet the underwriting loss ratio target. The implementation of

these strategies will enable carrier’s access several important data to evaluate the risks and

optimise service delivery and maintain positivity within the industry.

Strategic Underwriting 14

References

Risk Underwriting - Strategy and Governance. (2015). Value and Capital Management:

A Handbook for the Finance and Risk Functions of Financial Institutions, 513-526.

doi:10.1002/9781118774359.ch23s