Tell me about the operations of a P&C Insurance Company

[wizard_l]

"Tell me about the operations of a P&C Ins. Co." - I got this question in an interview once. I gave a half-coherent answer about pricing, reserving, product development, planning, underwriting, and claims handling. The interviewer answered: "Fair enough, since you are entry level, I didn't expect you to know more." From the interviewer's tone, I don't think I gave the correct answer.

Thinking about it more, is the interviewer really asking about the common product lines of a P&C firm, instead of how a P&C firm is operated.

What do you think?

[CtrlAltDelete]

Pricing and reserving may be too specific.

Mainly just three: underwriting, actuarial, and claims. Don't think you should go too specific into the details since you are entry level. Certainly also talk about the general types of LOB that they write. Also, agency vs. direct. That's probably about it. However, if you have internship experience, I expect you to know more than that.

[wizard_l]

Originally Posted by CtrlAltDelete

Pricing and reserving may be too specific.

Mainly just three: underwriting, actuarial, and claims. Don't think you should go too specific into the details since you are entry level. Certainly also talk about the general types of LOB that they write. Also, agency vs. direct. That's probably about it. However, if you have internship experience, I expect you to know more than that.

Thanks for the response!

What is the significance of agency vs direct? My noob mind can only grasp that they are different channels of distribution and maybe because of this, agency would have less risk than direct because (I'm only guessing here) the agents and underwriters are more involved in risk selection.

I have internship exp. but not in P&C.

[Vorian Atreides]

Cost is a big factor for agency (can be 10-18% of premium depending on how the commission is set up) vs. direct (can be as little as 3% since commission isn't a driving factor). This can put about a 10% spread in the indicated premiums. This can be significant if a company is desiring to grow market share.

[sideout1212]

Don't you think sales/marketing is a bigger part of the picture than actuarial for example. I think most companies see the priority as sales/marketing, underwriting, claims, actuarial. Yes, each is important, but depending on the LOB actuarial could be a very small part of the business.

[wizard_l]

Originally Posted by Vorian Atreides

Cost is a big factor for agency (can be 10-18% of premium depending on how the commission is set up) vs. direct (can be as little as 3% since commission isn't a driving factor). This can put about a 10% spread in the indicated premiums. This can be significant if a company is desiring to grow market share.

Is the commission paid one-time only when the agent sells the policy, or is it paid every time renewal comes up?

In terms of risk profile, do actuaries price differently for agency vs. direct. Say we have the same 25 y.o. male driver getting a quote for personal auto through agency and direct, before expenses loading, should his premium be the same?

[wizard_l]

Originally Posted by sideout1212

Don't you think sales/marketing is a bigger part of the picture than actuarial for example. I think most companies see the priority as sales/marketing, underwriting, claims, actuarial. Yes, each is important, but depending on the LOB actuarial could be a very small part of the business.

Right! Yes, I think that's it! I was interviewing with an actuary, and I unconsciously narrowed the scope to "the operations of the actuarial department in a P&C firm" and focused too much on the actuarial side.

[Vorian Atreides]

I would say that the other areas (sales/marketing/agency, underwriting, and claims) are higher profile than actuarial, especially when it comes to the public perception of the industry. But I would make an argument that the actuarial department is often just as important as the others given that a "competitive rate" often relies on the actuarial department to get support and approval from regulators.

[CtrlAltDelete]

Originally Posted by sideout1212

Don't you think sales/marketing is a bigger part of the picture than actuarial for example. I think most companies see the priority as sales/marketing, underwriting, claims, actuarial. Yes, each is important, but depending on the LOB actuarial could be a very small part of the business.

For short-tailed lines, yes. For long-tailed lines or larger companies, no.

[ditkaworshipper]

Originally Posted by sideout1212

Don't you think sales/marketing is a bigger part of the picture than actuarial for example. I think most companies see the priority as sales/marketing, underwriting, claims, actuarial. Yes, each is important, but depending on the LOB actuarial could be a very small part of the business.

Actuarial can be very small, yes. However, it's hard to get approved products without an actuarial department, and none of the other departments do anything without those. That's what keeps our salaries on steroids.