The key to best practice underwriting is detailed industry understandings of the relationship between elements of an owner builder project and risk economics.
In 2008 Qamvis Insurance Group was invited to participate in path breaking research to identify, experience, analyse and build real life cases to better quantify owner builder risks.
Once research commenced a small handful underwriters and industry practitioners recognised better practices was possible if 4 existing barriers were removed or at least redefined.
1. Most owner builder underwriters are part time as owner builders are bundled-in along other classes of insurance, which in most examples dwarf owner builder revenues. Line of business amalgamation means skills development, hands on experiences and regular real life challenges are diluted or either non-existent or infrequent.
2. Internal work load pressures places barriers to learning mindsets, when the reply is always about time and expediency.
3. Senior underwriters reluctance to invest in updating their rudimentary and often outdated knowledge of owner builders.
4. Lack of motivation to change the way things are done.
The 2008 research benchmarked best practice underwriting techniques which led many to freshly re-examine roles and methodologies of continuing best practice underwriting. Underwriters like most Australians, are inundated with over 174 newspapers’ worth of information every day (Reference David Derbyshire, MailOnline 2013). Information and data is a prerequisite, but processing such volumes and then applying regular learnings to underwriting process improvements is something else.
A fresh perspective was required if Brokers are to remain central distributor and partner to insurers and owner builders are advised and insured appropriately for their particular risk and circumstances. In other words Brokers remain central to insurance economics. A fresh approach in ‘tight’ markets is not easily implemented.
Brokers remain at the core of owner builder insurance business for the very important reason that when retail clients collide into commercial insurances, the uninitiated and inexperienced owner builder relies on independent advice and counsel. It has almost become trite to say owner builders are the same across the nation. They are not. The risks are not. Insurance economics are not.
Moreover, in most cases owner builder business is resource (staff and time) intense, as the prospective client are unsure of their precise insurance requirements and as Brokers seek out details of the actual risk. The Benchmarking study found the following cost centres in an average owner builder transaction:
1. Brokers transacting 15 or more policies per month (40 transactions per quarter) incurred costs a 28% more than those Brokers who produced 5 or less transactions per month.
2. Cost activities defined process chain as:
a. Advertising and new business acquisition costs;
b. Pre-proposal communications;
c. Underwriter interactions;
e. Post-proposal communications;
f. Back office administration;
g. Policy life management.
3. Commissions and broker fees including credit card fees, accounted for 30% of base premium.
Owner builder transaction costs are accentuated by acquisition costs. Broad, web based advertising increases cost of acquisition considerably. Referral and organic new business enquiries reduce these enquiry costs and rebalance this line of business contributions.
Like most enterprises, uncontrolled costs cannot be influenced by actions of the executive team. However imputed costs or costs which can be managed without any cash outlays are highly desirable.
Underwriting Agencies whose sole purpose is to provide comprehensive and wholesome value proposition improvement to Brokers and intermediaries, can impact these imputed costs significantly.
Qiducia Underwriting platform is about delivering these competitive advantages