It is a widely held notion that one does not have to know the job to manage people who do the job.
This certainly makes sense for most blue collar and clerical occupations.
Does the same rationale apply to non-underwriters (defined as individuals that have never been underwriters) managing underwriting professionals?
At our study groups, this is recognized as an increasingly important question, in part because the number of individuals with no underwriting background who oversee new business departments is increasing.
What are the areas of potential concern here?
I have found four broad issues and made some observations.
Note: in each of the following issues posed as questions in bold italics, “they” refers to non-underwriters as heads of underwriting shops.
Do they recognize underwriting as a profession?
I find that many are prone to wave off the reality that underwriting is both a science and an art. They see the “art” aspect as a self-serving notion or affection, intended merely to inflate the perception of our value to the company.
Real underwriting requires the ability to “connect the dots” on a case and then to recognize their interactive implications, both objectively (science) and intuitively (art).
Some new underwriters “get it” and others do not.
I have seen MBAs “flunk out” as underwriting trainees while others without college degrees became elite risk assessors!
When underwriting is seen as merely tracking down debits in a manual and then using elementary arithmetic to get “the answer,” this reinforces the flawed perception that our profession is little more than a (over-compensated?) clerical occupation
Do they value productivity over quality of work?
Artificially inflating the significance of productivity while downgrading the comparative significance of the quality of our work is one of the greatest threats to our profession and its future.
Moreover, it is akin to playing Russian roulette with the insurer’s bottom line!
Nevertheless, I have seen non-underwriters in charge of new business operations embrace productivity as the overarching basis on which they and their subordinates assess underwriters’ performance.
It is far easier to measure productivity than to accurately ascertain the caliber of decision-making. Thus, these individuals are disposed to become enamored of productivity metrics. They favor “stop-watch” studies that measure the time it takes to complete every aspect of our work.
Have you seen any compelling evidence that either mean or median aggregate time measurements have any significance whatsoever in the scheme of things?
I, myself, have not.
This is not to say that productivity is unimportant.
An underwriter who typically spends half a day ruminating over a decision on a single case is unlikely to have a long career in our profession! This was as true decades ago as it is today…before we had much in the way of productivity metrics.
Bottom line: productivity is a benchmark best suited to production line workers and routine clerical jobs, where judgment has little or no bearing on work outcomes.
Quality is a benchmark best suited to professional occupations, where judgment has everything to do with work outcomes.
The more emphasis placed on productivity at the expense of quality, the closer we come – for want of a better term – to the “clericalization” of the underwriting profession.
It is equally disconcerting when non-underwriter new business executives become naively infatuated with so-called “big data.”
There are elements here – such as lab scores, financial records, etc. – that have a legitimate place in risk appraisal. Others are anathema to what we do and pose a clear and present danger to our profession and the industry.
We already have carefully crafted underwriting paradigms that are cost-effective, highly credible and well accepted by producers, their clients and regulatory authorities.
If new business executives bereft of well-honed underwriting insight unwittingly embrace elements within the “big data” spectrum that undermine our high standards, they put all of us at risk for serious downstream consequences
Are they are less likely to appreciate the importance of continuing education for underwriters and industry networking by underwriters?
Non-underwriters managing new business operations are more disposed to a “bean counter” mindset than veteran underwriters who run their shops.
Allocating adequate – indeed, any – budget resources for education and industry networking requires insights and perspectives they often lack.
This makes them more prone to currying favor by oft-indiscriminate cost cutting.
How highly will continuing education be regarded by those who consider underwriting as essentially productivity driven?
Some companies actively support underwriter participation in local and state/provincial underwriting associations; others are more penurious.
For the most part, veteran underwriters serving as heads of new business appreciate the value of the learning, networking and professional self-esteem…and therefore support our associations.
Non-underwriter managers are more likely to pinch pennies in this context. I can testify to this because I helped to create or resurrect 6 associations and got far more cooperation from area companies with experienced underwriters in charge.
Are they more likely to choose resource providers based largely if not wholly on cost alone?
There are many things to consider when choosing a resource provider.
Clearly, one of them is comparative cost for more or less the same product or service.
- Here are some of the others:
- Comparative turnaround time based on adequate data.
- Prevalence of errors, such as poorer quality ECGs.
- Subpar performance in other domains that generates complaints from producers and clients.
- Abiding by the insurer’s mandates; for example, not sending the lab specimens to the “wrong” lab.
- Accessibility and responsiveness when problems or questions arise.
- User-friendliness of their system’s data presentation.
- Availability of customized data, such as lab results sliced and diced by various demographics and other criteria.
- Peer companies’ experiences with the provider (access to which requires adequate networking).
In the 2014 Reinsurance and Underwriting Services Survey, 57% of respondents rated cost as a “highly significant” consideration when choosing providers. 43% said it was only “somewhat important.”
Many other considerations got much greater percentages of “highly significant” responses than cost. Could this be a reflection of the divided perspective between underwriters vs. non-underwriter new business executives?
One suspects that non-underwriters managing new business are more likely to make these decisions based largely on cost, with most other factors more or less “off their radar.”
They are also less disposed to allocate adequate staff to measure provider performance and furthermore they will not have sufficient connectivity to easily seek out the insights from chief underwriters in other companies.
I know more than a few instances where non-underwriters have flourished as heads of new business (including several I worked for early in my career).
They have done so in large measure because they relentlessly sought out…and then paid close attention to…input from savvy professional underwriter subordinates.
This said, I would argue that the weight of evidence favors having a seasoned underwriting professional at the helm of new business operations...especially if one cares, first and foremost, about the company’s mortality bottom line.