Inside Baseball: Lessons for Today’s Risk Managers from a Retired CUO
"As I grow older, I pay less attention to what people say. I just watch what they do."
In a recent conversation with Ken Jenkins, a long-time friend and former chief underwriting officer, I asked him about retirement and we ended up in a discussion related to lessons he learned over his 30+ year career as a property and casualty underwriter.
In particular, I was interested in how he evaluated risk managers and if his qualitative assessments factored into decision-making and pricing.
While Ken always appreciated the thought and effort poured into the annual roadshow, his focus was on understanding if the risk manager could apply the resources to understand and manage their risks. He sought evidence, beyond a slide deck, that the risk manager was empowered, proactive, and strategic. Essentially, did the risk manager have the tools, talent, and authority necessary to identify strategies and investments in avoidance, resilience, and/or mitigation beyond insurance?
With respect to understanding a risk manager’s discretion and ability to implement initiatives, Ken would look to the risk manager’s:
- Staff: How many? What disciplines?
- Budget: Any discretion? How was funding secured for proactive investment?
- Reporting Line: Did the risk manager have access to executive decision-makers?
- Responsibilities: Was the role solely focused on risk management?
To gauge this dimension, Ken sought to understand a risk manager’s time horizon and role. Was the company more focused on the next quarter or the next decade? Were executives more concerned about the income statement or the balance sheet? Was the risk manager thinking about risks and how they relate to operations and enterprise-wide KPIs?
Evaluating Strategic v. Tactical Thinking
To evaluate whether a risk manager was strategically minded, Ken wanted to know if the appropriate data is being collected and invested in. While intellectual curiosity was nice to have, what made a risk manager best-in-class was actionable data, the ability to interpret it, and the wherewithal to take action.
So, when risk managers today are thinking about optimizing their outcomes, they may benefit from realizing that their prices are a consequence of more than their losses and market dynamics. In Ken’s experience and as evidenced by this recent TechValidate survey of commercial property underwriters, intangibles and strategic thinking can move the pricing needle up to 20%--a valuable lesson indeed.
Written by Fred Kipperman
Former Managing director at Archipelago Analytics, a lawyer, and an optimist. His work at RAND, Praedicat, and Archipelago has been at the intersection of risk management, insurance, efficient markets, and societal benefit.