This sums up partner relationship management for me. One day the sun is shining and the birds are singing. The stars are fully aligned and everything is going to plan. But then the wheels start to fall off…. they always do (and if they don’t then the partnership isn’t trying hard enough to maximise potential).
This doesn’t have to be anyone’s fault either – it could be external unforeseen factors, or it could be something closer to home. Regardless of the source, laying blame or dwelling on the issue is not helpful and it is very easy for both sides to become entrenched in their views. What is important is how we navigate and work our way (collectively) through this that defines whether the season of light will soon be upon us once again. Two key elements we should follow to prevent such a standoff are 1) an early meeting of minds and 2) considering the other’s viewpoint in resolving disputes.
A failure to plan or adequately prepare for troubling times can make things worse when they arrive. It’s well documented that MGAs and their carriers often have differing objectives so anticipating potential conflicts isn’t hard. As you stare at the black clouds on the horizon, you know that you can’t stop the rain from coming, but you can start to make your way home before it arrives. Yes, you might get wet, but you shouldn’t catch pneumonia!
So have the tough conversations upfront, ensure there is clarity and a genuine meeting of minds. All too often in a new relationship you only focus on the nice bits rather than the differing interests. Agreeing commercial terms is purely academic if strategically both parties seek very different things. While the differences are likely to remain, understanding these up front should help to resolve these differences when they do arrive.
So onto the second objective, how do we navigate our way to better times? Well, it isn’t straightforward and there is no one-size fits-all approach but trying to park our own issues to one side for a second and taking the third person perspective is often helpful. This is, after all, the approach professional mediators (and marriage guidance counsellors) tend to take. But why does this work?
Well, for one, when we approach any situation where there is conflict or disagreement with someone, the natural human response is to fight and always focus on what we need to happen from our own perspective. And we get really annoyed if they can’t completely see, understand and bow down to our point of view. Right?
It should come as no surprise to hear that the other side feels exactly the same and while both sides feel justified in their stance, this is just really reinforcing each party’s position without taking a single step into “no man’s land” where a mutually acceptable solution lies.
As Henry Kissinger knew when facing the intractable Egypt/Israel conflict, taking the 3rd person perspective and attempting to understand each side’s position is a healthy start point. If you can appreciate where they are coming from and what is at stake, then you can realise why they might not be able to completely see, understand and bow down to your point of view. And if both sides approach the position from the third person perspective, then you are on the way to reaching a solution much quicker and emerge with your relationship intact.
So take the time to get the prenuptials agreed, and if disagreement does raise its head try to channel your inner Kissinger. After all, as that opening Dickens sentence concludes, those best of times and worst of times were “like the present period”: these ups and downs will always be with us.
There has been a lot of speculation recently around the use of AI in insurance and how this signals the death knell for Underwriters. Having mopped up the coffee that I spat out and checked my life insurance provisions, this got me to thinking. Surely not all underwriters? But if not, then who?
The ineffable question of the “effs”. What should a business aim for – and more specifically, for us, the underwriting function in an insurance business – efficient operations or effective decision making?
We have all heard of the boiling frog syndrome which says: if a frog is put in boiling water, it will jump out to protect itself. However, if you place a frog in cold water and slowly turn up the heat, it won’t notice the subtle increase in temperature and be boiled alive.
Game theory aims to shed light on outcomes where multiple actors operate. Dry academe often assumes “ceteris paribus” even in social sciences, but in the real world when we are trying to anticipate the outcomes of decisions one actor makes it is essential to consider the possible and likely responses of other actors…
In various parts of our lives, we are examined and tested to grade our ability and knowledge, be that driving tests, ‘A’ levels, or piano exams.
And so it is with the insurance industry. Boards and regulators are increasingly pushing for demonstrable oversight. This is especially true in the field of Delegated Authority (DA)…
Managing General Agents (MGAs) provide insurers a broad opportunity for profitable growth. Operating in niche sectors with lean efficient models and providing customers with products that they often find hard to come by in the mainstream. All of this is wrapped up with the relevant expertise and providing insurers with access to markets that…
As 2022 was drawing to a close, insurers across the UK were starting to look at their results, keeping their fingers, toes and everything else that they could, crossed in the hope that December would fizzle out in a whimper.
But alas it was not to be as temperatures plummeted and the industry suffered…
What use statisticians and actuaries when the world is being transformed by modern data-analysis techniques? What hope for clunking humans in the era of Big Data (Facebook sells data which influences US presidential elections), of Artificial Intelligence (China can identify disliked racial groups through automatic facial recognition technology)…
Catastrophes – natural events where one “system” (wind, earthquake etc) causes multiple insurance claims in one go – are difficult. Much else in insurance pricing is subject to conceptually simple averaging-over-time, but cats are different. You can’t take a 5 or 10 year history of natural-peril losses and assume you have an accurate view of exposure to catastrophes…
In part 1 of this triptych on insurance pricing we looked at Technical Price (TP): what must be covered over the long run to make reasonable profits. I finished that note by considering TP in the context of the market. Here, I take this theme further and explore more how to think strategically about pricing.
This note covers the fundamentals: the three building blocks of a technical price and a note on the role technical price plays. It is followed with a deeper look at pricing strategies. Finally we consider a knotty topic, cat(astrophe) pricing, in particular the use of cat models to inform the price.
On 26th September 1983, at the height of the Cold War, Soviet missile monitoring picked up apparent signs of five nuclear missiles launched from the US. Retaliation was the default planned reaction.
Calibrant was established to bridge a gap. The gap is that between MGAs and their carriers. And it finds many forms.