The catastrophic property insurance market has had trouble the past few years. With the market firming as a result of adverse loss development, there is temptation for insurance distributors to focus on top-line growth over bottom-line income.
It can be challenging for insurance carriers and brokers to be cost competitive in coastal markets, according to Bryan Schofield, senior vice president of commercial lines at Orchid Insurance, a specialty underwriter of catastrophic property insurance. With significant wind and storm surge exposures, strong underwriting disciplines and thoughtful distribution are key in these areas.
“There’s always someone out there who is undisciplined and more worried about the top line than the bottom line,” he told Insurance Business. “Since Orchid is an underwriting organization with CAT expertise, our emphasis is on preserving profit and making money for our carrier partners by aligning cost to exposure.
“Orchid takes advantage of modeling tools, data and analytics that we have developed in-house or that are available to use through strategic relationships. Before a policy is even quoted, we know if we are charging enough premium to cover the carrier’s cost of insuring it, and the impact that policy will have on our probable maximum loss.”
Technology has completely transformed the way insurance firms can tackle catastrophic weather risks. It is enabling faster detection of developing weather events, more accurate underwriting and pricing of risks, and much more efficient claims resolution. The more data insurers are equipped with, the more control they can take over the impacts of mother nature’s harshest blows.
“Although we’re not an insurer, we do underwrite on their behalf,” said Schofield. “Enhancing the user experience using third-party data, drones, modeling, data analytics, and other tools all play an integral role in providing solutions and service to our clients. There’s a tremendous amount of data out there that insurers can take advantage of, and they should be utilizing it.”
Natural catastrophes are distressing enough, without business owners having to close shop because of inadequate insurance coverage. This is an unfortunate reality Schofield says he hears “far too often from [Orchid’s] claims partners,” and it’s something brokers can help clients to avoid.
“There are so many differences and nuances in every policy, so it’s difficult to talk through all of them. However, a few consistent topics are undervalued/underinsured properties and business income,” he said. “Agents and brokers need to make sure that they get these limits right and have a thorough discussion of the exposures the insured could be susceptible to.”