October 19, 2011
Bill Crigger, SPHR, MS
Critical Thinking Application
As an underwriter who works in the small commercial field, the decision-making process is critical. When an account is under consideration controls that alleviate losses, years in business, type of business, and underwriting guidelines must be analyzed. An important step in the process is to decide first whether or not the account makes sense or has the potential for profitability. Critical thinking examples from previous work-related experiences in the underwriting decision-making process and the importance and benefits of the process ensure the best decision is made.
Underwriting guidelines differ based on the program or type of business. If a risk fits underwriting guidelines, research, and tried studies on past policies show proven profitability results. The underwriting process is similar to University of Phoenix decision-making model (Paul, 2006). Identifying the problem or considering the risk is the first step in the underwriting process. The company’s goal is to issue profitability business. Making the decision or deciding to move forward in the analytical process that determines if a risk can be profitable. Wasting time on a piece of business that has no probability of making money is pointless. Evaluating the impacts of the decision or comparing an insured business to underwriting guidelines is an important step in ensuring a fit for the company and classification. Identifying the cause of the problem or identifying what classification best suites a risk guarantees proper rate and premium. Framing alternatives or giving options to the agent who is quoting the business gives the insured options on different premiums. Small business owners like to have options because funds are often limited. Evaluating the impacts of the alternatives or the options an underwriter gives to the agent can have dramatic repercussions on future losses. If the wrong coverage is proposed, a risk may not have the particular coverage they need to indemnify a future loss. The seventh step of the process is to make the decision. Underwrites must make a decision and often in a timely manner. Underwriters have several polices to review and time is crucial because agents will shop accounts. Measuring the impacts of the decision can be told through loss runs after a policy has expired. If a policy shows no losses, or if the loss ratio is zero percent, the underwriter has made a good decision to write. The implementation process includes the final issue order from the agent. This final step wraps up the initial underwriting process.
Examples and Work-Related Decisions
A typical day at the underwriting desk for a small commercial underwriter is fast paced. Depending on the company, underwriters have quotas that must be met. Different programs and lines of business require different levels underwriting authority. A good example of authority and the decision-making process occurs when an underwriter is faced with a decision to bind an umbrella policy with 10 million dollar limits. Limits of proportion typically need management approval and if the underwriter chooses to negate authority his or her quality scores will show a downgrade. Another example of work-related decisions that the underwriter must make is the decision to write contractors who do complete remodels. Underwriters must rely and trust agents because they are sending