Smart Underwriting Practices Ensure Thoughtful Approach to Stop Loss Risk Management

Extensive knowledge of the stop-loss market and a clear understanding of a group’s risk are key factors to ensuring the right coverage is in place for clients.

“Data is critical to a successful risk management strategy,” says Mark Lawrence, Senior Vice President of Underwriting for HM Insurance Group.

But that’s only one piece of the puzzle. He likens predictive modeling to a directional pointer that provides insight into whether a risk is the right fit for the insurer.

“There’s more data than ever available for us to help assess risk,” he says, noting it’s a double-edged sword because of the time and resources required to analyze it correctly.

The insurer doesn’t rely on predictive modeling exclusively in underwriting decisions. It’s one of several factors reviewed as a whole. Hundreds of individual data points are analyzed in correlation to one another to evaluate the future performance of a group.

Transparency throughout the process results from both parties having access to the same data.

“It really makes it possible to have a good marriage of what they’re looking for and what we’re providing,” Lawrence says. “From an insurer’s point of view, access to the same data gives us confidence to price and underwrite the case appropriately.”

Since the stop-loss market is well-established, it’s easier to balance protection for everyone involved.

“A client isn’t going to buy a policy from us if there’s no risk transfer,” Lawrence says. “And the flip side of it is, we’re not going to sell a policy where we go into the coverage period expecting claims will be two or three times the size of the premium that we offer.”

The client should feel they have adequate coverage for large medical events, if they occur.

“We’ve been able to strike that balance,” says Lawrence. “Clients feel like they’re getting protection, and we feel like we’re getting a reasonable premium to provide that protection.”

He continues, “There are many nuances in this business. It’s complicated, and it’s really important for our clients to work with somebody that can help them.”

Knowledgeable brokers answer client questions so they understand and work to mitigate their risk, while ensuring there is enough coverage as their budget will allow.

While price may be the only concern for some, Lawrence offers this advice: “The cheapest option is not always the best option.”

A well-crafted policy rounds out the insurer’s risk management strategy.

“We don’t have a lot of disputed claims.”