Meeting the increasing complexity of E&S insurance

To take advantage of this growing segment and to better deliver operational performance, Outsource Insurance Professionals (OIP) in August announced key leadership changes. One of which was the appointment of Martina Seferovic as president and CEO of the company.

Insurance Business America spoke with Seferovic (pictured) to learn more about the US E&S market, how her knowledge process outsourcing (KPO) company is helping insurance companies in this very busy time, and which key trends are currently driving the industry.

Can you tell me about Outsource Insurance Professionals and the place it occupies in the insurance ecosystem?

As the only Knowledge Process Outsourcing (KPO) company in the surplus lines segment, we’re strategically aligned with our client partners, occupying a unique and valuable position within the ecosystem. Our industry is experiencing unprecedented growth trends, putting us on pace to hit $100B in premium by year end. 

With 170 domestic carriers, 30 of which joined within the last four years, the race to establish ground in our thriving market, opens the door for hasty underwriting. And this is where we come in. OIP’s 500+ assistant underwriters support our clients’ top and bottom lines, driving profitable production more efficiently. 

Our cyclical, and often volatile market sheds light on the tremendous difference between completing a specific task and providing true underwriting support. The surplus lines expertise found within our services and solutions spans industry wide throughout the US, UK and Canada and supports a broad client base of carriers, syndicates, wholesalers, coverholders, MGAs, MGUs and TPAs.

Although the negative stigma associated with outsourcing is not new, as our industry evolves and improves, so has the perception. Where offshore companies were only considered a method to cut costs and offload simple tasks, business leaders have recognized the value gained through a broader distribution. Producing greater output, more efficiently, and at a reduced cost is no longer viewed as removing local job opportunities but instead creating new ones.

When our clients’ employees spend their valuable time on the right tasks, their organization’s growth and success exceed any results they would have delivered by keeping all tasks in-house. This success often leads to additional investments and expansion, generating far more local employment opportunities than previously possible.  

As a solutions provider, how have you seen the demands for new and innovative support services change in recent years?

The demands have changed significantly these past couple of years, particularly with the solutions we provide. The industry realizes we can’t continue to do things the same way – that pertains not only to performing manual tasks that are now heavily automated, but also securing talent with E&S expertise.

Where outsourcing was once considered taboo, many now recognize the value of  ‘cosourcing’, and welcome our experienced staff to support their team’s growth and development. Conversely, those who’ve outsourced for years, have expanded from using BPOs to process basic tasks, to partnering with a KPO, whose underwriting judgment and critical thinking elevates the entire portfolio’s value. 

Our segment of the industry is dynamic, innovative and filled with opportunities; using technology to capitalize on those opportunities has become more prevalent. We all understand how data drives product development; having the freedom from rate/form filings allows us the flexibility to make swift changes.

However, we can only ensure the right decision is being made with clean, accessible data. The traction and engagement we’re seeing on one of our flagship insurtech solutions, has really exploded in the past year. By branching outside of our industry to partner with the leading data-scraping company, Hyperscience, then by bringing the initiative back in-house, our OIP Robotics professionals developed NT Extractor specifically for E&S. Providing our clients with technology exclusively designed for our business by experienced people from our business, has been a game changer.

What factors are instrumental in driving this change?

The complexity of E&S has been increased by external factors such as economic slowdown, inflation, remote work and generational knowledge gaps. As the borderless world continues trending throughout most business segments, and remote work has yet to reach its peak, we’ve seen how automation has incapacitated some new hires who lack the know-how of “pen and paper” policy rating, thus opening up a higher liability to their employers.

While carriers have traditionally been the exclusive owner of all policy data, we’re observing a significant shift towards the MGAs’ needs, which is quickly commanding industry-wide attention. Collecting critical information is essential to analyze their book, remain a viable competitor, meet/exceed their goals, and identify missed opportunities.

Any producer who’s built a solid book of business understands the threat of losing a market or their capacity. Many have experienced this; however, the journey varies greatly depending on whether or not the producer owns their portfolio’s data. With complete, structured data, the process of moving a profitable book from one market to another is considerably less laborious. It becomes far more challenging when the key data points are not easily accessible or structured in a format that clearly reflects how healthy the book is.

Given your expertise in the Excess and Surplus lines segment – can you give me an overview of key market trends you’re seeing in this space?

The surplus lines market is performing at its peak. The growth trends are tremendous, the profitability continues to improve, we’re seeing significant organic capital being generated, and our operational efficiencies continue to be refined. Overall, the unified discipline our collective group is demonstrating is promising.

In speaking with many clients recently, it’s quite apparent that ‘remediation’ is the word of the day. Everyone is analyzing their book to see where they can improve results. The trending focus is on how to analyze and better manage their portfolio. Carriers and MGAs/MGUs who are leveraging tech advancements are benefiting from the capacity reductions by gathering data, crunching numbers, and applying it to niches within their portfolio. The proactive players who are quickly rising to the top have embraced evolving conditions like insurtech disruption, supply-chain interruption and inflation.

Markets are still tightening their cat property appetite, wanting only to write risks that are further inland/better construction. Both carriers and Lloyd’s syndicates across the industry are taking a closer look at their exposed aggregate and seeking property intel. We’ve received a substantial increase in underwriting audits for coverholders and wholesalers, specifically in and around coastal states.

Proper valuation is a big issue across multiple lines of business. Whether it’s rising home values and construction costs, inflationary conditions, or the sky-rocketing prices of used vehicles – adequate valuations are a challenge. In the transportation industry, specifically with physical damage coverage, valuations are now being adjusted mid-term, which is unprecedented.

OIP has enjoyed significant expansion in recent years – does the E&S lines segment differ from location to location?

We’ve worked hard over the years to develop a diverse client base spanning across the US, UK and Canada, which has immensely broadened our underwriting exposure from business models to product lines, territories to legal climates. Understanding the geographic impact adds value to our daily underwriting; however, several exposures or challenges are universal, with only location specific nuances.

While some territories are more litigious than others, the legal environment continues to drive claim trends with 15 industry verdicts exceeding $25 million, this year alone. Property valuation is another issue found across the board; however, having familiarity with the location is critical to the underwriter knowing what proper valuation is for that specific location.

What’s next on the strategic growth agenda of this business?

While organic growth has been the root of our successful expansion, we’ve reached a pivotal point where it’s now time to firm up our position as an industry front-runner. Our professional level services have gained traction with our client partners, specifically those in the delegated authority space, where the bulk of the business is written on behalf of the carrier. Traditionally, file audits were performed on-site by company underwriters; however, this expensive and time consuming approach captures an insignificant amount of files. Our carrier clients are benefiting from significant time and cost savings with virtual audits conducted by OIP personnel. A full package of ‘trust but verify” service is provided in the fields of pricing, risk selection, analysis and subjectivities, as well as file completion. We expect the growing demand for this service to continue.

This year we have formed an Advisory Council composed of mga, carrier, and insurtech executives, with the mission to identify industry issues and challenges, and brainstorm innovative ways to solve them. Our vision is to elevate the entire surplus lines industry through strength and stability. We are better together, and will jointly collect information, exchange experiences and develop best practices to share with the market.

Of course, our strategic agenda is closely connected to technology initiatives and global expansion to new markets and employment opportunities. But let’s talk about something that offers immediate value to any strategic plan: profitable production. When it comes to increasing profits, a healthy book of business, standardization, and improved operational efficiencies are all just as imperative as adequate rates.

OIP is all about sharing success so maybe the biggest message for the audience herein is related to internal efficiencies. Through constant conversations and years of experience, we understand, anticipate, and exceed expectations by delivering faster response times, quality excellence, consistency through standardization, and meeting service-level agreements.

We’ve collected, compared, customized and implemented industry best practices into all of our procedures, and rather than requiring our clients to spend time training our staff, we offer a standardized SOP for each, resulting in incremental improvements to our industry, one client at a time.