Underwriting at AA Munro

Underwriting, as we all know, is an important part of the insurance industry. Something that we might not all realize is that AA Munro has in-house underwriters for certain markets. For example, Terry Gillis works mainly with Aviva out of our Whycocomagh office, while Christine Flynn works mainly with Intact out of her home office in Donkin. Terry and Christine are just two of the eight underwriters currently at AA Munro. I met with each of them over the summer to talk a little bit about their lives and to get a feeling for what it’s like to be an underwriter at AA Munro.

INTERVIEWER

Where did you grow up? 

TERRY

I was born in Churchill, Manitoba many moons ago into a military family, and then moved to numerous communities throughout Ontario, Nova Scotia and Prince Edward Island during my childhood years, before finally settling in Whycocomagh.

 

 

CHRISTINE

I have lived in Donkin since I was 4 years old. So not yesterday!

 

 

INTERVIEWER

Do you have any pets?

TERRY

We haven’t had a pet for many years, though we do enjoy them. We like to maintain an active lifestyle, and we find ourselves away from home far too often to be leaving a pet unattended.

CHRISTINE

Yes, one cat. His name is Shamus. I’m an animal lover and feel that my life is not complete without a cat or a dog.

INTERVIEWER

What led you to work as an underwriter?  

TERRY

We had made the decision when our children were young that I would work from home doing bookkeeping, in order to be there for them as much as possible during those early years. Once they were teenagers, it was time to find a more interesting career outside of the home. When the job opportunity was presented at AA Munro to be an underwriter, it seemed like the right opportunity at the right time.

CHRISTINE

Your Dad! I used to do broker/CSR work and was looking for something different. He approached me I believe in 2005 or maybe 2004 and said that Sovereign was going to allow us to do in-house underwriting. He asked me if I would be interested. Of course I jumped at the chance.

INTERVIEWER

How many brokers do you usually deal with in any given week?

TERRY

I talk on the phone or exchange e-mails with approximately 50% of our brokers in any given week.

CHRISTINE

Every week is different, but I would average about 25 to 30.

INTERVIEWER

How do you evaluate risk?  

TERRY

Each insurance company has specific rules to which we need to adhere. The “refer” rules are more flexible and if a risk falls within these criteria, we can make the decision to accept it based on certain circumstances; or we can request that certain recommendations be completed within a set timeframe. The “decline” rules, particularly with auto, which has filed rates, leave less room for flexibility. If we accept business that falls within the “decline” area, then we require company approval based on sound underwriting judgment. When evaluating risk we also look for trends, such as reviewing an Autoplus to determine whether a client switches companies regularly or has re-occurring payment issues. If the client was lapsed by a prior company, there was usually justification for doing so; therefore a full evaluation is required before assuming risk. For habitational, a picture certainly tells a thousand words in terms of evaluating a risk. If any gray areas are apparent, we can then start the process of working with the client and the broker to ensure potential issues are made known or corrected before the individual cancels with their current provider.

CHRISTINE

To evaluate a risk and appropriately rate the exposure is very similar to what happens when a mortgage company underwrites a loan application. When you consider the amount of money that can be on the line with an insurance company’s promise to pay, it’s easy to see the importance of underwriting before taking on a risk. Irresponsible underwriting can easily tilt the loss ratios in the wrong direction and be the source of financial ruin for an insurance carrier (this is what happened in the mortgage industry!). However, the underwriting process can be a source of frustration for clients and brokers who are eager to have their coverage bound and feel bombarded by the number of questions asked. I know Intact’s rules, guidelines and underwriting criteria and what is considered an acceptable risk. Photos are very important (as it’s been said many times before, a picture is worth a thousand words) because what might look like a good risk on paper may not be. With photos you can see hidden hazards that may not be provided on an application, such as a swimming pool not fenced, an oil tank too close to a body of water, a chimney installed on the home when the application indicated electric heat only, or homes or outbuildings in poor condition etc. I also trust my instincts. If something just doesn’t feel right I will ask for more than usual information and a photo before I will accept the risk. Prior loss history is another important factor that is reviewed  for all lines of coverage. If a risk has a high loss frequency in the past, chances are that it is more likely to have future losses. Obtaining underwriting information is critical for insurance companies to maintain responsible business practices that generate enough revenue to cover all possible claims and operating expenses. The underwriting process can make you feel like you’re going through the  “third-degree” at times, however it is a required step. (Georgie gave me a “sarcastic ball” as a joke. It’s like a magic eight ball, with sarcastic answers. I use that sometimes ………… Just kidding!)

INTERVIEWER

How do you explain loss ratios to brokers?

TERRY

Many brokers are very aware of loss ratios, to the point that they feel personally responsible when a major loss occurs with a risk that they have placed on the books. For other producers, there is more of a perception that if we keep volume up, then this will eradicate the negative effect of any claims that might occur. We need volume; therefore a certain degree of risk is required. That is what drives insurance. At the same time, actuaries spend hours establishing rates to reflect the degree of risk, according to statistical data they have collected, resulting in premium variances. Trying to fit a mid-market risk into regular market might get the client into the door. However, if that becomes the norm rather than the exception, the gradual erosion of our loss ratios is inevitable. We have a duty to invest the insurer’s capital in a responsible and professional manner that follows the company’s strategic plan for what should be a profitable book. If we cannot provide this, then we risk losing a market or seeing premiums go up.

CHRISTINE

I don’t really explain this, but I have mentioned a few times in the past that if we write business just for the sale without really giving much thought, it could lead to trouble. We need to keep our book of business clean so we can be around for a long time. I have advised some brokers if our loss ratio gets high and stays that way, we could very well lose the market. What insurance company is going to deal with an agency that is helping them lose money? 

INTERVIEWER

How do you explain your job to your relatives?

TERRY

I say that as an in-house underwriter, I act as an intermediary between the insurance company and the producer, ensuring the client receives all eligible discounts and that the company receives the pertinent information to accurately assess the risk. I also support producers with difficult decisions or to help obtain the information required with the “grey” aspects of insuring a risk or confirming coverage. 

CHRISTINE

Hard one, most non-insurance people just don’t understand the concept. I tell them for example if they were to go into our office and take out a new policy or do some sort of change, the broker completes the paper work and sends it to me for review. If acceptable I will enter it on the company’s system.

INTERVIEWER

What are some pros and cons of in-house underwriting?

TERRY

We have the experience and knowledge required to ensure that both the client’s and the insurance company’s needs are best reflected. We get to establish relationships with the producers and with the insurance company and assist with decision making in the gray areas of underwriting. We know our producers, and the daily struggles they might be going through, so we can exercise leniency when necessary when negotiating timeframes for required information. The insurance company will more readily accept a piece of business from us at face value. Also, a long time client with AA Munro can also be more easily underwritten by reviewing their history on TAM. As for cons, there is a certain degree of ownership of the book by the in-house underwriter that might result in occasionally making decisions that are tougher than ones an insurance company would make. In addition, if we know pertinent information traditionally takes a longer time to arrive with a particular broker, we might tend to be more cautious with what we accept, hence weakening our working relationship with the particular broker. Another con of in-house underwriting is that we are not privy to the insurance company underwriting meetings, so if changes are made, sometimes we are the last to know.

CHRISTINE

The pros are that I have access to both TAM and the company’s system, so if I get a change request/memo or new application and information is missing I can look on our TAM system directly at the client’s account and hopefully find it without having to contact the broker. As for cons, it is very difficult when a broker won’t respond or if  I have concerns about the accuracy of the information being provided. Also my co-workers think I work for Intact, not AA Munro and believe I make up the rules (if I was only that important!).

INTERVIEWER

How do you stay “current” about the insurance industry and risks in Nova Scotia?

TERRY

I stay current by starting each morning with reading the AA Munro alerts and the CIP newsletters. As manuals are updated, I try to get into them and review any changes. I am also a sounding board at times for producers, so if they have a general insurance question, I will try to investigate and find a solution or response, hence gaining knowledge of wordings, etc, while doing so. I obtained my CIP in 2006 and on occasion I will drag out a book to refresh a particular topic. Because so much of my day is spent with Aviva, I do try to review the other manuals during slower periods. However, it is difficult to do this regularly due to time demands; and retention of this knowledge can become a struggle.

CHRISTINE

Talking to brokers, our weekly underwriting meeting with Rodney, emails to all staff members; if there any updates or changes Marie Gower (the Intact underwriter we deal with) will advise by phone or email; also through training seminars provided by insurance companies and our own agency, and the Insurance Institute.

INTERVIEWER

What do you like to do after work?

TERRY

I like to be active. I really enjoy outdoor activities like hiking, boating, golfing, biking and gardening. The vast majority of my free time is spent volunteering within the community, such as at the Whycocomagh Waterfront Centre. When I have some down time, I enjoy researching and planning getaways to gain new experiences (with friends and family whenever possible). 

CHRISTINE

When’s that?!