New Reinsurer? Some Tips For A Smoother Transition

With so many companies changing names lately, you have to look at your letterhead just to make sure you know whom youre working for today. Swiss Re bought Lincoln Re, Life Re, Cigna Life Reinsurance and other companies in the U.S. and in Europe, while ING has been busy buying other companies as well. These mergers and acquisitions bring financial opportunities for each company and new challenges for others.

Life insurance companies that were used to doing business with the same reinsurer for a long time–where good working relationships had been established, where they could each interpret their own “shorthand” in their communications, and where a set of unwritten “rules” for submitting facultative cases had been in place–may have to struggle a bit to get in step with the new reinsurers business style.

Some of you may be thinking, “Oh, but we deal with more than one reinsurance company. If we start having trouble with one, we’ll go to the next…”

Uh-huh, just wait.

It’s only a matter of time before one or more of your reinsurers becomes a new member of the “Mega-Reinsurer” family of companies and it will be necessary for many insurers (except those who are “self-reinsured”) to prepare to do business with “the new kid in the block.”

At some reinsurance companies, the acquisition may have been transparent if there were few or no major changes made by the buying company. However, if as part of these changes, department heads and other key employees were replaced, and the old reinsurance manual (which everyone knew how to use) was trashed to make way for a new one (that is unfamiliar even to the underwriters at the reinsurance company) you had better keep some aspirin on your desk. You’re in for a few headaches.

If your reinsurer now uses a different reinsurance manual you’ll probably find out after:

–Theyve rated that “business sensitive” case so high you cant pronounce the letter or number: Tabletablewhat?

–The same client had been approved “Preferred” by them before the “buyout.”

–Youve told the broker “so far, this case looks Standard.”

–Youve complained at length to that new underwriter on his decision and you demand to talk to his Chief and he replies, “You’re talking to him.”

OK, the above has been exaggerated a bit for effect, but it’s still true. Something similar happened to me.

One of our reinsurers who is now under new management approved our “business sensitive” large case with a rating that seemed a bit extreme. Meanwhile, I’m trying to calm down the agent, the marketing director and the new business staff, who are all calling me or following me to the water fountain asking about “the case.”

I questioned the decision because it wasnt consistent with similar cases we had referred to them before.

After the usual “please hold” I heard some people whispering in the background, like a soccer team before a crucial play.

I found out they had started to use a different reinsurance manual–the one from the parent company–which was a bit more “conservative” in some areas, and that they where just learning to use it themselves.

OK, so maybe someone applied a rate straight from “the book.” Thats understandable, but detrimental to our company.

It took a few calls, and a bit of faxing back and forth but the rate was reduced to a more “marketing friendly” one. I did asked them to send us their new manual.

Chief underwriters who encounter similar scenarios are going to need hands-free headsets to manage all the calls from the field:

–”Table 8? I will lose this client.”

–”What do you mean it hasnt been approved yet?”

–”What? You need financial statements from 1985?”

–”You need a ‘dangerous sports’ questionnaire? The man is 80-years-old, the most dangerous thing he does is bending over to get the remote…”

It will take a while and many conference calls to get the “new” reinsurers and insurers on the same sheet of music. Meanwhile, here are a few tips on things you can do to make the transition easier:

*Be proactive. If you know your reinsurer has been acquired by another company, ask if they will change manuals, and if so, ask them to send you a copy, or a CD-ROM for your companys use.

*Ask if there will be changes in the staff, and if so, ask them to fax you a copy listing the new staffs names and contact information. Chief underwriters and their underwriters need to know to whom theyll be referring cases and who to contact if they dont get the service theyre used to getting.

The insurer should not suffer any inconveniences because of the new reorganization. Business should be kept running smoothly.

For some insurance companies, speed in underwriting may be their edge over the competition, as their products may not be the most competitive. If the reinsurer slows the approval of facultative cases, their production may suffer.

*If you know others in the industry who have worked with this reinsurer before, ask them what their experience has been and what is the best way to approach any disagreements.

Remember, insurers need reinsurance, the attitude should always be a “win-win” approach.

You cant just stop sending business to one reinsurer because you dont agree with some of their decisions.

Shopping around for new reinsurers takes time and effort, some of which can be put to use solving any disagreements with your current reinsurer.

The insurer-reinsurer relationship is in many ways like marriage: after youve had an argument with your spouse, you get in the car and drive around for a while, mumbling to yourself, squeezing the wheel. And it doesnt matter how angry you were, at the end of the day, you always go back home.

If you feel a decision from the reinsurer is a little extreme, ask what their concern is, and be helpful by providing additional information they may require.

Maybe theyve had bad experience with similar cases; maybe theyre used to having a detailed written explanation by the underwriter with all cases.

If normally your reinsurer replied within three days on a case, dont wait a week to find out the status. They may have put yours at the end of the line due to reorganization.

Communication is important in reaching the desired goal, which is prompt approval of well-underwritten business. Make sure you know what is the reinsurers preferred communication tool. Maybe they prefer fax to e-mail, or e-mail to phone calls.

Anticipate adverse scenarios, and prepare to find and put into action effective solutions to any disagreements with your new reinsurer. This will save time and effort and keep underwriting running like a Swiss watch: precise, efficient, and reliable.

Dan Vel?zquez is a senior underwriter with Great American Life of Puerto Rico. He can be reached via e-mail at execpr@yahoo.com


Reproduced from National Underwriter Life & Health/Financial Services Edition, May 13, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.