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By Susan Kearney, CPCU, ARM, AU, AAI
Ethical behavior is vital for underwriters to build trust and confidence with their customers directly and on behalf of the industry as a whole. In honor of Ethics Awareness Month, the CPCU Society Underwriting Interest Group (http://bit.ly/1dnx3Wt) presents the following scenario for your consideration, thoughts and comments:
In recognition of a continued competitive marketplace for business insurance in 2014, your company decides an underwriting pricing strategy is in order. In your underwriting managers meeting, three “fair” solutions are suggested.
One approach argues that the fairest solution is to offer certain discounts across all the accounts of a certain risk classification. Restaurants, for example, would get maximum discounts of a certain percentage, retailers another, etc.
The second solution suggests that the fairest approach is to recognize that some accounts in all risk classifications are preferable to others and to price them accordingly. This requires dividing accounts into platinum, gold and silver. (The idea came from a frequent flyer program.) Under this approach, the platinum accounts would get the most aggressive (lowest) pricing; the gold market would get medium discounts; and the silver, full manual rates.
The third solution is much like the second, except its proponents argue that the fairest approach is to designate not the accounts, but the carrier’s agencies as one of the three levels. Then when asking for quotes, the platinum agencies could get the deepest discounts; the gold would get medium discounts; and the silver, no discounts at all.
Which of the three proposals do you think is fairest? Why?
For additional details on the CPCU Society Underwriting Interest Group, please visit: http://bit.ly/1dnx3Wt
Susan Kearney, CPCU, ARM, AU, AAI, is senior director of knowledge resources at The Institutes.see less