Vitale used business interruption—and its many contract variances, as an example. He called for a greater focus on terms for a more succinct industry-wide definition of coverage and triggers for typical coverage before adding specialty endorsements and limits.

More clarity would cut down on lawsuits following major events, Vitale adds.

Terrence Cavanaugh, president and CEO of Erie Insurance, says he has been working with the National Association of Insurance Commissioners (NAIC) in his role with trade association Property Casualty Insurers Association of America (PCI) to cut down on the “lack of transparency in the policy, especially with more sophisticated products.”

He adds, “The integrity of contracts is the key to business.”

UNDERWRITING IS KING AGAIN

The insurance industry faces challenges from the current economic climate, including a lack of investment return, low interest rates, and rising inflation. These challenges are leading to renewed focus on underwriting, the executives say.

“In some ways it's not all bad to have underwriters that focus on underwriting,” Cavanaugh says.

Vitale says the industry used to be able to make a profit—thanks to investments and reserve releases—even with a combined ratio above 100.

“Those days are long gone,” Vitale says. “The only way to achieve a return today is with underwriting.”