Your boss gave you a list containing “Referral or Referred” risks 😕 with specific instruction that your agents cannot accept them but to make referral to you. You would have to assess whether you have the authority to accept such referral otherwise your decision is whether you would want to escalate this to your boss for a decision.
You boss also provide you with another listing containing “Declined” risks 😈 , and his instruction was to reject those risks when coming across.
In recent days the meaning or definition in respect of “Referred Risks” and “Declined Risks” is blurring….driven by the many marketing developments both within Malaysia and around this region.But before we get confused as to those blurring effects, it is best we check out the original definition… if at all these are the originals.
The original definition of “Referred Risks”:
These are risks where the company would be prepared to consider acceptance depending on the merits of each and every case and agents must seek the company’s approval before commitment of cover is given.
The original definition of “Declined Risks”:
Declined Risks are risks which the company does not accept in the ordinary course of business. Therefore, exceptions will not likely be made by the company except in very special circumstances.
What exactly is blurring and the contributions thereof in between the meanings of both terms?
- Most insurance personnel have the tendency to breakdown this referral risks’ listing according to their prescribed authority, ie. agency referral, marketing executive referral, manager referral and underwriters’ referral listing… despite the fact that the company only has a single prescribed list and such practice has tendency of creation of many pseudo-referral listings and therefore confusion across the organisation,
- Because of intense competition, availability of wider treaty cover and willingness of the treaty reinsurers to accommodate request for cover beyond the treaty terms resulted in many traditional “declined” risks being pushed down as referred risks, and
- Markets driven by as well pressured by agency and brokers’ total portfolio resulting in increasing demand for the usual declined risks to be accommodated on commercial consideration. Naturally many of the declined risks are being recognised as another referral risks!
The result is the referral risks within the listing are growing where as the declined risks are shrinking.
Put it simply, the blurring line in between both these two terms of reference is the results of some thrusting forces that came from the broking fraternity and the willingness of the treaty and/or the facultative markets to accommodate special acceptances over the last couple of years. (Re)insurers are also to be blamed for losing focus as to their underwriting philosophy and worst developing a “mass-market” mentality in any of their business development activities. Nevertheless, the recent 1st January 2009 Risk-Based Capital (RBC) implementation may have changed this to a large extent. Most stakeholders are now coming to some senses and new appropriate parameters are being redrawn…. May we take this opportunity to rewrite the above definitions?
Referral Risks: These are risks where the company would be prepared to consider acceptance depending on the merits of each and every case, including the intermediaries’ overall portfolio. The main objective in this respect is to enable the company (“insurer”) to have better control over its portfolio development and to seek relevant reinsurance clearance before concluding the acceptance where necessary.
Declined Risks: Declined Risks are risks which the company does not accept in the ordinary course of business and exceptions will not likely be made by the company except in very special circumstances. The term, “very special circumstances” shall refer to the subject-matter where a comprehensive report is available, approval granted after peer-to-peer at senior level and subject to reinsurance clearance if required.
Anyone not satisfy with such rewording of the two terms of reference?