The good and bad in real estate insurance submissions
Quality risk data is just one fundamental to achieving favorable outcomes for parties involved in real estate transactions.
The insurance industry has faced the most significant digital revolution in the recent decade, completely changing how real estate portfolios are underwritten, bought and sold. In a hardening market, with narrowing carrier appetites, this puts pressure on real estate transactions to be adaptive, competitive, and meaningful with terms and conditions provided. The most significant barrier to meaningful terms and conditions is the ever-constant quality control of submission data between parties.
So, how does the quality control of submission data play such a key role? As Joe Quarantello of Risk Strategies said, “It starts and ends with a good submission.” Submission quality for a risk sets the foundation for a “win,” whether it be a broker to insured, an underwriter to broker, custom-designed technology systems for underwriters and brokers, and so forth.
Environmental insurance experts were asked the burning questions on submission quality in real estate portfolios. The leaders included:
- Marcel Ricciardelli, senior vice president, Allied World Environmental and Design Professional Divisions
- Joe Quarantello, senior vice president, Risk Strategies,
- Hiral Shah, JD, senior vice president, Environmental Sompo Global Risk Solutions,
- Michael Gill, partner, Synapse Services, LLC
- David Oldow, principal, Griptiller LLC
Achieving submission quality
What have they have seen in the revolution of technology, the barriers they face by the ever-constant quality control of submission data, and lastly, the heart of insurance utmost good faith?
“I really think that people in the real estate portfolio world for environmental insurance spend half their time battling organization of the submission. This has been an ongoing issue in this space for as long as I have been in environmental insurance,” Gill said.
Disorganization of data was the number-one barrier to thoughtful terms and conditions. We have all heard the term time is money, and when accessing a deal or opportunity, presentation is everything!
The result of an unorganized submission with a lack of data or a disorganized submission can portray a lack of seriousness or indicate a lack of controls in place to receive the necessary data to offer the best terms and conditions for that risk.
In the past, underwriters that understood these real estate portfolios’ risk historically and industrial usages were underwritten to that historical knowledge, Shah explained. But with emerging contaminants, you are also going to get more questions. For example, what kind of industrial use, one use versus another, could indicate potential exposures that need to be underwritten. Many emerging contaminants are changing in the marketplace now, not just the usual we hear about.
Today, there’s more of a renewed focus on the tenant uses, what kind of tenants are being brought on, whether they have environmental insurance in place, etc. — that data is even more pertinent now to the underwriting review.
In bridging data gaps in submissions, “the most effective broker knows their client and obtains the information needed, whether that be from a principal of the insured, the risk management department, the legal department, or the operations department,” said Ricciardelli.
A silver lining is that “a perfect submission does not need to be onerous to put together!” according to Shah, who added, “It’s just the timing of the work as to when you’re going to do it: Either before the submission, after the submission or after binding.”
The other piece is revolutionized technology for real estate portfolios can play a considerable role in handling an organization’s “grunt work.” Submission data collection has changed over time, “passing around Excel spreadsheets for property lists (an upgrade from yellow pads) and electronic Word or PDF documents (an upgrade from dusty physical data rooms) since the 1990s,” said Oldow. “Today, data transmission is primarily via email and FTP sites. But size limits and “bucket of docs” architecture make downloading laborious.”
From a brokerage standpoint, previous technologies never solved the unanimous issue of inconsistent file naming and always the fear of carriers not receiving information, which could result in losing a deal from a brokerage standpoint, Quarantello noted.
In utmost good faith, brokers don’t make the underwriter make assumptions on the risk. This is when things can be misunderstood and miscommunicated to the detriment of terms and conditions and, ultimately, your insureds. “There is value to communication around what are must-haves, or the priority of the information needed. This goes hand in hand with the submission quality,” said Shah.
What are the characteristics of a quality submission?
Among the environmental insurance industry leaders interviewed, all unanimously agreed these are four underwriter must-haves in submissions, starting with accurate organized information that includes:
- SOV’s
- Loss runs
- Environmental site assessments/current reports
- Ensuring the submission is complete
A master property list with good addresses is fundamental, as is a complete list of engineering documents, but there are plenty of portfolios out there underwritten on mismatched spreadsheets with missing documents.
According to Oldow, there are two important steps to sharing solid submission data between transaction partners, including:
- First, brokers sort and reconcile data provided by their clients to understand the risk and the quality and completeness of the supporting data. Miscellaneous docs are culled, a master property list confirmed, and the age and quality of reports are noted. This is a great opportunity to work with the client to “perfect” data content.
- Next, the data is presented to the market in such a way as to ensure a quick understanding of the risk and easy data downloading. Underwriters with a good picture of the portfolio can quickly calculate their underwriting workload and get into the docs fast.
Speed, accuracy, communication and efficiency improves for all transaction partners when manual processes are digitized.
Bringing it all together in real estate portfolios means providing a quality submission through organized data, using custom-designed technology for real estate portfolio transactions, and maintaining utmost good faith results in “better business relationships to work together innovatively with and trust and credibility for all partners,” Quarantello concluded.
Angela Oroian is president of The Society of Environmental Professionals (SEIP). This article was first published by SEIP and is reprinted here with permission.
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