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The RMIS, renewals & outperforming hardening insurance markets

hardening markets, renewals, RMIS resized 600For risk managers, last week’s news that commercial property/casualty insurance rates rose an average of 5% in April over those of the same month a year earlier was a big story. The April increase, which matches a 5% rise in March, suggests a hardening of the market for commercial insurance products.

Although risk managers certainly won’t celebrate a hardening market, changing conditions can serve as a useful call to action. Specifically, my experience with risk managers shows that even in a hardening market, there are ways for risk managers to slow the rate of growth in premiums and even outperform market benchmarks.

There are numerous ways for risk managers to outperform market benchmarks, but I think this is a timely moment to discuss the crucial role of risk data and exposure data in the renewal process. It’s no secret that the timely submission of accurate, historically comprehensive data is among the best ways (maybe the best way) for an organization to differentiate itself in the insurance market; the operative question is, How should risk managers go about making the best possible submissions?

Insurance Renewal Infographic

Insurance submissions that stand out

In March 2009, amidst signs of a hardening market, IRMI advised risk managers to prepare by taking certain concrete actions as part of the renewal process. More than four years later, IRMI’s advice still applies. When combined with Aon’s recommended best practices for renewals, following are four key actions that risk managers should consider taking:

  • Prepare submissions that are complete, accurate and organized in a way that makes it easy for underwriters to find the information they need.
  • When providing supplemental estimated forecasts based on the anticipated economic conditions, be sure that forecasts match management’s predictions.
  • Maintain and review accurate loss data for trending and other such analytics.
  • Track loss control surveys, engineering reports and maintain active list of recommendations.

By taking actions like these, a company can prove to the market that it is actively mitigating its risk. When you place yourself in the shoes of an insurer, it’s clear which company will get the better rate in this hypothetical scenario: One company provides a list of its exposures with a year or two of history. A second company, of the same size and in the same industry, provides similar exposure information but also submits proof of how the numbers were developed and supplemental information like that indicated in the bulleted list above.

The commitment: Making the best use of risk and exposure data

Whenever we talk about data, especially at the organizational level, we must also acknowledge the necessity of some kind of technology and process to collect, interrogate, analyze and report on that data. For risk a manager, that usually means some sort of risk management information system, whether it’s a homegrown system/process or a full-blown third-party risk management information system. For the purposes of this discussion of risk data and exposure data, the kind of RMIS isn’t salient; rather, it’s all about the data itself and the organizational commitment to making the best use of it.

Risk management software is a proven tool for improving the efficiency of the renewal process. But when the RMIS is used to provide comprehensive year-over-year historical data with a submission, rates and terms will also improve.

As conditions harden, the potential return on investment from improving the management of risk data and exposure data grows correspondingly. Fortunately for risk managers and their organizations, the size and scope of any such investment can nowadays match up nicely with any organization’s needs, size, sector, industry and other important characteristics.

In my next post, I’ll discuss the various ways that risk managers I’ve worked with have approached the goal of improving the renewal process by optimizing their use of risk management software. As I’ll examine in more detail, making the data-collection process faster and less labor-intensive is often the first step for companies; once efficiency has been improved, a company will be in a good position to begin developing submissions that are accurate, historically comprehensive and organized in such a way that the organization will stand out for underwriters.

Michael Theut is a member of the Solutions Consulting team with Aon eSolutions. Please email Michael at michael.theut@aon.com

RMIS Guide

May 17, 2013

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