Surviving the squeeze: managing general underwriters must travel the tough road back to pricing accounts accurately and profitably.

In an era when many managing general underwriters are being squeezed or find themselves struggling to survive, how does an organization manage to stay strong and prosper? The answer lies in a managing general underwriter's ability to continually reinvent itself by implementing insurance carrier diversity, strengthening underwriting practices and continually improving work flow processes.

Managing underwriters can survive and prosper if they continue to offer value to both carriers and agents. Those underwriters with a history of managing specialty coverages provide a knowledge base of underwriting expertise and claims-handling savvy that large carriers may not have readily available. By forming long-standing relationships with both agents and insureds, managing underwriters provide an element of security and predictability through difficult market cycles.

Relationship management is a vital component of any business, and managing underwriters should continually strive to develop alternative insurance carrier options for their customers. Acquiring the ability to place business with a number of sources provides stability for all parties in the insurance process. Through the consistent underwriting and claims management provided by the managing underwriter, agents and insureds can rest assured that if one insurance carrier decides to discontinue coverage, another market is readily available. Additionally, the distribution of risk among insurance companies benefits the insurance industry itself.

One of the most important aspects of the managing general underwriter model is the ability to focus in on individual program management, providing control measures which avoid adverse selection and reduce carrier risk in entering unfamiliar markets. Unfortunately, the soft market of the 1990s pushed many managing underwriters into a price war mentality. They must travel the tough road back to pricing accounts accurately and profitably.

Assessing and maintaining the highest underwriting skill levels, as well as providing additional training and education, are good for both the employee and the managing general underwriter A process of evaluating ability and matching appropriate individual levels of authority reinforces the underwriting system. Numerous industry associations offer continuing education classes that address all levels of insurance knowledge. It is our responsibility to encourage and promote continual improvement within our own organizations.

We can and should be a resource for agents looking to expand their own businesses. Assisting agents trying to break into niche markets by offering suggestions before the underwriting process begins is all essential component of good account management. An agent who has a first-time opportunity to write a health club or a sports team may welcome a discussion about coverage and loss issues before meeting with the client.

Taking the time to gather all pertinent application information is a vital step in supporting sound underwriting practices. Thorough review of completed applications and other sources of information may point to a need to implement pricing controls, certain exclusions or other loss control mechanisms. While we would always like to provide coverage as quickly as possible, managing general underwriters have a responsibility to methodically study submissions and prepare an appropriate quotation.

Reviewing internal controls and performing sell: audits also can clean up guidelines that should be updated and ultimately enhance underwriting integrity. Managing underwriters with compliance employees on staff have the advantage of staying on top of an ever-changing morass of statutory regulations.

Those managing underwriters that continue to offer quality loss control and claims services always will be viewed as a valuable option by carriers. A claims staff with a high degree of expertise in program business and a history of expert reserving skills should be a mainstay of a managing underwriter's program management, as is providing knowledgeable loss control personnel available for consultation on challenging risks.

And those managing general underwriters that excel in the future are the ones that go the extra mile and consider offering additional services as a necessary piece of the total package. Agents and insurance companies view managing underwriters that have the ability to provide actuarial, reinsurance and underwriting support as valuable resources. This strategy of knowing the client--whether it be an insured, an agent or the partner insurance company--and providing excellent service at all levels is critical to the continued existence of managing underwriters.

Ross Smith is president and chief executive officer of K&K Insurance Group Inc. He can be reached at [e-mail].