Often we're asked whether providing additional information to insurers really does make a difference to securing a competitive premium. In this article we explore with our underwriters why this is now more important than ever, but also how best to achieve this for your firm.
First impressions count
When advising our clients, we often describe a proposal form as their 'shop window'. This is because something as simple as how the form is presented can affect how your firm might be viewed by an underwriter.
The classic comparison is between a handwritten proposal forms with scribbles all over containing comments such as “you already have this” or “as per last year”. Compare this to a proposal form with a typed form and covering letter with additional notes throughout the form. Ask yourself which you would pick up first as an underwriter? This is of course a basic point and in many respects common sense, but you may be surprised at just how many proposal forms fit the first description. A scribbled and rushed proposal form may suggest a sloppiness that is not reflective of the firm – think about the impression you want to make.
Never assume
It is also wrong to assume that the same underwriter will review your presentation each year. Comments like the examples we have highlighted above will be unhelpful to whoever reviews your presentation. In addition to this, many insurers undertake peer reviews to ensure a consistency to their underwriting approach. Therefore, consider that it may not be just the underwriter who reviews your submission.
What are the benefits of a covering letter and/or additional information?
In the last decade the use of a full proposal form has been somewhat limited, especially for smaller firms. In addition to this, many firms have enjoyed early renewal offers and simplified declarations. Many firms will see a change this year and may have already been asked for a full form or additional information. Use this opportunity to tell your story including the past, present and aspirations for the future. Talk about your people and culture as this is what makes you unique.
When discussing this with a Senior Underwriter at Travelers he said “My views are quite simply yes it's seen positively. The main point is it's the insureds opportunity to elaborate/expand on certain areas of the proposal/questions that give underwriters more insight and understanding of the risk.”
Let an underwriter know if you have money in your budget for a new IT system or improvements. Do you have a good claims record and if so why? If you work in a high risk area such as property and haven't had any claims, this is something to shout about, what are your processes and procedure? And, if you have had claims don't underestimate the importance of explaining the lessons learnt. It may be that there can be very little criticism of the firm but an underwriter will not know these facts if you don't tell them.
The same underwriter added “Particular focus on risk management and systems/IT in place including culture/governance especially on the larger risks give real insight into the firms practice, but equally narrative on claim(s) and lessons learned/actions taken are equally as important in any supplementary information provided.” Another underwriter at Excess Layer Insurer Markel International agrees and adds that “if good risk management details and other good underwriting info is supplied I will take this into account especially when generally the work is in higher rated categories and this is likely to have an impact of mitigating increases”.
The length and detail of a covering letter will depend on the type of law firm but suffice it to say that even those that operate in vanilla areas of law could benefit from spending a few minutes putting a few paragraphs together. Elaborate on your work type, for example, commercial, what is this? It could be drafting supplier contracts with values of up to £5,000 v's an aviation contract with a transaction value of £80,000,000 – the exposure to an insurer is very different but on paper the two firms look exactly the same. Every insurer has flexibility with the rate that they charge against work type, in this scenario explaining the nature of the commercial work is critical to ensure that you are paying the right level of premium. Don't assume that just because you operate in what is described as low risk work that this is irrelevant.
Lockton can provide guidance on what a covering letter should include to get the best outcome for the renewal and we would be very happy to discuss this with you.
In addition our online proposal form has a notes function throughout the form so you can include additional information against almost all of the questions and therefore it enables you to provide a very comprehensive submission.
The Lockton team has a vast amount of experience and look after all sizes of firm undertaking all different types of law. We can provide benchmarking data based on our portfolio so you can compare against your peers and we will give you honest and transparent advice about your PII.