What is a ‘norm’ is, of course, an entirely subjective test, as opinions may differ wildly between what I, e.g. as a DA Manager or Compliance person, may think and what my colleague on the underwriting or claims side might think.
Oh, and what about the Coverholder -what do they think? And Lloyd’s… the FCA….?
Working out the ‘norm’ may be tricky and particularly so if your Coverholder is distributing a product which is new and has no readily identifiable peer group to measure it alongside.
So, where do you think we should start in setting what would be considered ‘the norm’ and, thereafter being able to create an appetite statement where anything outside of the agreed ‘norm’ can be recorded, reported on and tracked?
In my view, the answer is principally two-fold;
- Sales and distribution related MI – the Underwriter and the Coverholder set ‘the norm’;
- Claims and other after sales service related MI – the Claims Manager with input from the TPA and the Coverholder set ‘the norm’;
always with reference to their reasoning, including comparison to similar facilities/schemes, where available.
In both instances, you will see that I am proposing that the MI is shared with the Coverholder. You may ask why this is necessary, when the Coverholder has supplied the information? One key question is; are they aware of what it is actually saying? If (hurrah) they are, have they told you what they think about what the information provided is saying to them?
This is tremendously important as, if the Coverholder themselves have not actually thought about their appetites (or KPIs) around the MI, how are Managing Agents expected to create an appetite statement, against which to measure (non-underwriting) performance of a facility?
Again, I would be interested to hear your thoughts, but will explore the issue of involving the Coverholder in creating a risk appetite statement further in our next blog, Creating an appetite statement with your Conduct Risk MI (keep reading…..!)
Marcus Elwes
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