Post on 24-Dec-2015
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Who are We?
Mike Myers, CPCU, ARM
Portfolio Underwriting Manager
Sue Myers, CPCU, ARM
Underwriting Specialist
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Liberty Mutual Group
•Founded in 1912
•Number 111 on the Fortune 500 List
•$19.6 billion in consolidated revenue
•5th largest commercial lines writer and 8th largest
personal lines writer in the United States
•38,000 people in 900 office worldwide
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
CNA Insurance Company
•Founded in 1885
•Number on 144 the Fortune 500 List under parent Loews
Corporation
•$10 billion in revenues
•7th largest commercial insurance writer and 14th largest
Property / Casualty company in the United States
•11,000 employees in offices worldwide
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Overview
• Types of Insurance
• Commercial Insurance
• Different Markets in Commercial Insurance
• Underwriting
• Current Events
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Different Types of Insurance• Personal Insurance
• Health Insurance
• Life Insurance
• Commercial Insurance
• International Insurance
• Reinsurance
• Specialty Insurance
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Commercial Insurance
Insurance for Businesses
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Courtesy of www.bullesdoxygene.com
What Risks Do Businesses Have?
Workers
Autos
Property
Liabilities
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Workers Compensation
•Provides no-fault benefits to workers injured on the
job
•Types of benefits payable
−Medical
−Disability
−Rehabilitation
−Death
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Workers Compensation
• Grocery Stores –
• Ready Mix Concrete –
• Veterinarians –
• Newspaper Publisher –
• Metal Casting & Forging –
• Healthcare –
• Electronics Mfg –
• Television Network Sports –
Cuts, Burns
Vehicle Accidents
Animal Bites
Machine Operations
Silica
Manual Material Handling
Chemicals
Falls from Heights
What are some of the sources of Workers Compensation claims?
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Auto
• Protects the owner against losses arising out of the use of an automobile in business.
• Types of coverage include:
−Business Auto
−Garage
−Trucking
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Property
Protects against the perils like:
−Fire
−Theft
−Vandalism
− Wind
Covers:
−Buildings
−Contents / Stock
−Business Income
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Property
LaSalle Bank Building
12/7/05
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Liability
Protects the owner of a business for suits or claims for negligence of:
− Premises
− Products Produced
− Services Provided
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Commercial Insurance
Insuring Businesses:
−Small Market
−Middle Market
−National Market
Size
Complexity of Risk and Coverage
Handling Expenses
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Commercial Insurance
Middle Market:
−Single or Multiple Locations
−Auto Fleet Typically < 100 units
−Limited Flexibility of program structure
−Formal and informal controls for Risk
Exposures
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Commercial Insurance
National Markets:
−Many Locations
−Auto Fleets Typically > 100 units
−Sophisticated and Formal Controls for Risk Exposures
−Significant Flexibility in Program Structure – Share
Risk
−Financial Transactions – Long Term
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Functions of an Insurance Product:
• Claims – Handles Claims and Pays the
Losses
• Loss Control – Identifies and Controls Risk
• Actuarial – Predicts and Estimates Risk
• Underwriting – Accepts and Prices Risk
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Underwriting - Simply Stated
• Analyzes a customer’s business risk
• Decides whether to insure the risk
• Decides coverages to offer
• Decide appropriate structure
• Forecasts costs / Price transferred risk
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Underwriting Skill Set
• English & Speech
• Finance & Accounting
• Statistics
• Law
• Common Sense
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
It’s All About Risk
•Can have millions of dollars in limits on every
account, even the smallest
•Take on additional exposure with each added
coverage
•Even the best accounts could have a million dollar
claim (or Larger!)
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Current Events - Soft MarketSoft Market
−Excess capital leads to higher supply of insurance
−Carriers willing to offer more liberal pricing and terms,
driving rates down
−Lower rates drive down underwriting profit
−Can only maintain overall results if investment returns
are high
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Current Events – Terrorism•Terrorism Risk
Insurance Act of 2002
is a backstop for
terrorism loss
•Insurance companies
pay a deductible and
% of losses up to $100
Billion ceiling
•TRIA is set to expire at
the end of this year
Courtesy of www.whitehouse.gov
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Current Events – Oil Prices•Significant impact on all
levels of the economy
•Increased risk of
Bankruptcy
Courtesy of almostaproverb.com
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Current Events – Hurricane Katrina
•Worst National disaster the
Insurance Industry has ever
handled:
−Multiple states
−Devastated a Major Metro area
−Flooding vs. Wind
−Economic Losses to region
Courtesy of www.nola.com
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Commercial Insurance UnderwritingUniversity of Illinois
Finance 230
Current Events – Hurricane Katrina
•$125 Billion “Economic”
Damage
•$60 Billion to Insurance
Industry
•In comparison Hurricane
Andrew (1992):
−$21 Billion in Current $
Courtesy of www.nola.com