By swiftly identifying and addressing red flags in a request for proposal, group underwriters can avoid negative outcomes later in the insurance process, such as inaccurate pricing, profitability issues, and more. This article highlights some of the key concerns to be watchful of.
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As the gatekeepers of risk, group underwriters are tasked with evaluating a request for proposal (RFP) and making informed decisions. As they delve into the details of each RFP, identifying potential red flags that may signal underlying issues is crucial.
Red flags may not be cause for a complete halt at the RFP stage, but they do signal that something should be investigated or at least considered further before proceeding. Red flags take many forms, whether written or verbal, and range from missing information to incomplete or questionable data.
This is not to say the absence of essential data is intentional. Rather, it is often simply an opportunity for the group underwriter to gather additional details through a deeper dive.
Identifying red flags enables insurers to:
After reviewing any red flags, the underwriter must then determine if a group quote is warranted and how aggressive it should be, or if it should simply be declined. Having all available information can minimize adverse effects, such as faulty assumptions, conservative or inaccurate pricing, messy onboarding of a new group, challenging first renewals, and profitability issues.
What are common warning signs about which a group underwriter should be vigilant?
Groups who have not had prior coverage can present an opportunity for insurers, even while the lack of historical experience can make quoting on the group more challenging. Factors to consider when looking for red flags include:
How long a group has remained with previous insurers may display concerning patterns.
This could indicate that the group’s priority is finding the most competitive rates and terms. If the group changes insurers following the rate guarantee, the insurer may not be able to recoup the investment they made from when they acquired the group, such as the cost of setting up a new group and the ability to move the group’s rates to the required rates.
This may signal that the group is shopping for competitive rates to negotiate with their current insurer and has no intention of replacing them.
The current insurer’s experience can be revealing, and group underwriters should scrutinize historical data for inconsistencies or potential errors. Information that may warrant investigation includes:
Census data can provide key information for an insurer to build an understanding of a group. Only with precise information can an insurer deliver an accurate, customized quote with the most competitive rates. Red flags in census data can include several things.
Job titles that do not correspond with the employee’s earnings or the group’s industry, along with occupations that are missing or vague, can make it difficult to assess a group’s risk. This ambiguity can impact not only the rates quoted but also future renewal rates and profitability.
Missing or low earnings in the census data could indicate:
This information can lend insight into hiring trends, which can signal growth or high turnover.
It is imperative for an insurer to build strong relationships with advisors by fostering open communication and amplifying trust. This does not mean inundating advisors with questions; rather, it means proactively ensuring they understand the requirements and the advantages good data will bring to the quote process. If responses are not provided or tend to be defensive in nature, this can signal a red flag. Patterns to look for include:
When advisors rarely send quotes to an insurer or send only low-quality opportunities, it can signal that other insurers have declined to quote the unfavorable groups or that the advisor is compiling competitive rate information to negotiate with a group’s current insurer.
An area of concern can be the presence of frequent errors or omissions.
Having to repeatedly request information that should automatically be provided by the advisor is a red flag.
When information provided in the RFP is frequently modified it can signal an issue.
Altering information at the time of sale can trigger a red flag because, at that point, the insurer may be more agreeable to secure the sale or to support the advisor if they made an error during the RFP.
Repeated occurrences from the same advisor likely suggest it is time to discuss expectations around the process and the data required during an RFP so that the insurer can provide a complete, competitive quote.
It is important to weigh the pros and cons of requesting additional information, which can vary based on the group size. Following best practices can help insurers recognize and proactively address red flags.
Red flags are a reality in the RFP process. By recognizing and addressing these potential issues, underwriters can make sound decisions, safeguard their organization, and ensure long-term success.
