Note: This article contains includes information from the AXA XL and Advisen whitepaper, “Changing the Commercial Property Underwriting Dynamic.”
Natural disasters, rocketing rebuilding costs, and more have shed light on a commercial property underwriting process desperately in need of an update. Rates continue to rise, policies have become tougher to write and policy restrictions are on the rise. Something has to give. What needs to change?
By innovating the underwriting process through enhanced data collection and technology utilization, those within the commercial property market could be better positioned to navigate its evolving risks.
We know that natural disasters and pandemic-related struggles have placed a significant strain on the commercial property insurance market, contributing to large-scale claims and major underwriting losses. Looking ahead, extreme weather events are expected to only become more common and costly. Additionally, the unpredictable nature of the pandemic still makes it hard to determine when supply chain problems, inflation issues and related property rebuilding cost concerns will subside. This means commercial property insurers will likely find it increasingly difficult to keep up with rising claim frequency and severity for the foreseeable future.
Historically, underwriting processes within the commercial property market have been quite manual and tedious. This can lead to extra work, inconsistent information, limited ways to check valuations, and in some cases, just educated guesses. Obviously, this is a problem.
What’s the answer?
Innovation.
There are multiple steps that need to be taken to enhance commercial property underwriting processes. First and foremost, data collection measures must improve. Specifically, underwriters should have easier access to all of the information they need to conduct accurate calculations and make effective coverage decisions.
Plus, it’s important for insurers to be more open with insureds about the under-writing process and further explain how their information is utilized in coverage pricing and related decisions.
In addition to improving data collection measures, commercial property underwriting processes can be innovated through the increased utilization of technology and adaptation of digital tools. Relying more heavily on technology can eliminate the tedious aspects currently involved in the risk assessment and underwriting processes and simplify property valuation and premium calculation practices.
Clearly, underwriting processes within the commercial property insurance market need to shift. Fortunately, adopting innovative strategies—such as enhanced data collection measures and increased technology utilization—can help eliminate underwriting inefficiencies and help both insurers and policyholders ensure proper protection amid the latest market conditions.
To learn more about the changing state of the Commercial Property market, read the full whitepaper here. In this whitepaper, you’ll discover more insights into topics such as:
- Will commercial property markets continue to harden?
- What are the serious consequences of underreporting during the underwriting process?
- What are the risks of underestimated TIVs during the underwriting process?
- Is CAT modeling still relevant in a hard market?
- Is Risk Scanning the evolution of risk assessment for underwriting?
- What are the best risk management techniques to share with insured clients?
- What services help insurers and insured build transparency and trusting relationships?
Read it now.