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Commercial Insurance Underwriting University of Illinois Urbana – Champaign Finance 230

Commercial Insurance Underwriting University of Illinois Urbana – Champaign Finance 230. Who are We?. Mike Myers, CPCU, ARM Portfolio Underwriting Manager Sue Myers, CPCU, ARM Underwriting Specialist. Liberty Mutual Group. Founded in 1912 Number 111 on the Fortune 500 List

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Commercial Insurance Underwriting University of Illinois Urbana – Champaign Finance 230

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  1. Commercial Insurance Underwriting University of Illinois Urbana – Champaign Finance 230

  2. Who are We? Mike Myers, CPCU, ARM Portfolio Underwriting Manager Sue Myers, CPCU, ARM Underwriting Specialist

  3. 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

  4. 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

  5. Overview • Types of Insurance • Commercial Insurance • Different Markets in Commercial Insurance • Underwriting • Current Events

  6. Different Types of Insurance • Personal Insurance • Health Insurance • Life Insurance • Commercial Insurance • International Insurance • Reinsurance • Specialty Insurance

  7. Commercial Insurance Insurance for Businesses

  8. What Risks Do Businesses Have? Workers Autos Property Liabilities Courtesy of www.bullesdoxygene.com

  9. Workers Compensation • Provides no-fault benefits to workers injured on the job • Types of benefits payable • Medical • Disability • Rehabilitation • Death

  10. 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 Workers Compensation What are some of the sources of Workers Compensation claims?

  11. Auto • Protects the owner against losses arising out of the use of an automobile in business. • Types of coverage include: • Business Auto • Garage • Trucking

  12. Auto

  13. Auto

  14. Property Protects against the perils like: • Fire • Theft • Vandalism • Wind Covers: • Buildings • Contents / Stock • Business Income

  15. Property LaSalle Bank Building 12/7/05

  16. Liability Protects the owner of a business for suits or claims for negligence of: • Premises • Products Produced • Services Provided

  17. Commercial Insurance Insuring Businesses: • Small Market • Middle Market • National Market Complexity of Risk and Coverage Handling Expenses Size

  18. 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

  19. 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

  20. 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

  21. 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

  22. Underwriting Skill Set • English & Speech • Finance & Accounting • Statistics • Law • Common Sense

  23. 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!)

  24. Current Events - Soft Market Soft 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

  25. 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

  26. Current Events – Oil Prices • Significant impact on all levels of the economy • Increased risk of Bankruptcy Courtesy of almostaproverb.com

  27. 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

  28. 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

  29. Any Questions?

  30. Thank you University of IllinoisUrbana – Champaign Finance 230

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