How is Your Stop Loss Book Performing?

One of my favorite activities is analyzing stop loss book-of-business performance. Each review takes on its own form, and each reveals unique sources of profit and unique pain points. Most importantly, each has the potential to reveal new solutions and opportunities. 

There are several essentials for any good book review. 

• First, you need clean data. Without good data, or without the confidence that the data is good, little value can come from the study. 

• Second, you need to be able to able to effectively segment the data in ways that maximize the value of findings. While the inability to segment the book of business results in the inability to draw useful conclusions, too small segments can result in errant conclusions. 

• Third, and most importantly, you need to know how to make sense of your observations. Books of stop loss business tend to be quite diverse, and their performance can be volatile. Making sense of seemingly random results, knowing when to react, and perhaps more importantly, when to not overreact, is critical.

What are the results of our book of business reviews? We typically see them lead to one or more of the following: 

• Change in underwriting practices. This might be as simple as changing rules for setting aggregating spec terms or as complex as changing experience rating guidelines. 

• Change in producer relationships. This might range from offering preferred producer status to managing the book at the producer level to discontinuing producer relationships.

• Inefficiencies in rate manual. Stop loss manuals differ materially, and even the most commonly used manuals don’t work effectively in all settings.  Understanding and responding appropriately to this is critical.

• Spotting underperforming markets or targeting niche markets. Each underwriting organization has a unique focus and corresponding talent base that make success in any market niche more or less likely.

Is your book of business underperforming, or are the metrics confusing? If so, contact me to talk about potential solutions.