Ivory Towers

I was working on the renewal of my client’s Political Violence Insurance policy recently and noted that since the last renewal a year ago, quite a number of insurers from western countries have set up offices in Asia (namely Hong Kong and Singapore). 

In theory, this is good news for us brokers because it means we have more markets that we can approach so that we can get better terms for our client.

The reality however, has proven otherwise.  Some of these Caucasian underwriters seem to have relocated with the mindset that they are God’s gift to Asia.  While the inflow of these underwriters should provide a transfer of technical knowledge in risk assessment to the Asian market, the unfortunate part is that the knowledge that they bring with them may not be applicable to Asia.

For example, when I showed some of these underwriters my client’s loss incident history – my client gets attacked by terrorist groups every other month – they freak out when they read of bullets being fired at the client’s assets, or a grenade being thrown at the assets. 

Almost immediately, some of these underwriters will write off the client as an uninsurable risk.  What they don’t understand unfortunately, is that while bullets may kill a person, shooting bullets at a generator set and throwing a grenade at a concrete wall doesn’t really do much damage to the property.

I tried to explain to these underwriters that the important assets of the client are well protected by armed security forces and it’s the unmanned low value assets at remote regions that are always under attack.  However, these underwriters just don’t get it.  Maybe it’s the lack of military training (kudos to Singapore’s mandatory military service) that results in them equating a bullet riddled generator set or a pock-marked concrete wall to an aeroplane being flown into a skyscraper.

What’s worse, some of these underwriters have extremely condescending and snobbish attitudes.  They expect to understand spreadsheets and graphs without reading the accompanying explanations and legends.  Just like the Asshole who complained/questioned me about why the client’s assets are valued in USD whereas the client’s revenue projections are expressed in the local currency.

Well the obvious, common sense answer would be that the valuation report was done by an international valuation firm, and thus, USD, a hard currency, was used.  However, given that 100% of the client’s business takes place domestically, obviously the revenue projections are in the local currency right?

But no.  The Asshole underwriter, typical of some of these Caucasians who have relocated to Asia only recently, think that the world revolves around the western world, and that all financial projections ought to be done in USD or GBP.  What a load of bull!

Another thing that Caucasian underwriters need to learn is that in the Asian insurance market, the way you conduct yourself is very important if you want repeat business from clients or brokers. 

In the course of doing this same renewal, a Caucasian underwriter (known as the Beast) provided me quotes for a (e.g.) USD 100 mil policy limit in this form:

Section 1: USD 600k for the first USD 20 mil limit

Section 2: USD 700k for the next USD 80 mil lmit

These terms were also discussed in a meeting between myself, the client and the underwriter.  However, 1.5 weeks after that meeting, the underwriter suddenly claimed that he had no intention and will not provide a line for Section 2!  He said, if he was going to do the primary layer (i.e. Section 1), it would not make sense for him to do the excess layer (i.e. Section 2) as well.

My question to him then was, "If you had no intention to do the excess layer, then why did you provide a quote for it?"

His reply was, "I gave you that pricing for you to find someone else to sit behind it."

Now, this is really illogical to me.  Would you provide a quote to someone saying you will sell your house for $500k and when someone takes up your office, you reject it by giving the reason that the $500k price you gave was for the buyer to find your neighbour to sell his house at that same price?

I mean, why give a price if you had no intention to provide the insurance coverage in the first place?

My boss was also livid because the underwriter said in front of the client and us that he would not be able to reduce the price on the excess layer because given that he was covering the primary layer, if a really big loss happened, he would be hit twice – in both the primary and excess layers.

Now, when you say something like that, doesn’t it mean you were willing to provide coverage for both layers?

After that incident, I’ve concluded that unless I am forced to due to lack of capacity issues, I am never going to give this underwriter any new business.  Herein lies another lesson that Caucasian underwriters need to learn about Asia.  In Asia, your relationship with the customer is very important.  (In this case I would be the underwriter’s customer).  Play your customer out once and you can expect all relationships to be severed.  Conversely, if you build a strong rapport with your customer, you can expect strong business support from the customer. 

So my point to these Caucasian underwriters is this – come down from your ivory towers.  If your senior management is enlightened enough to spend a lot of money to invest in an office in Asia, it shows that they know that they need to grow their book of business in Asia.  Some countries in Asia may have once been your colonial conquests but wake up buddy.  The good ol’ colonial days are long over.

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N.B. There are some very nice Caucasian underwriters (those who entered Asia earlier) who treat Asians as equals and it is enjoyable working with them.  But hey… I’m sure they know that we support them because more often than not, we are their biggest source of premium income.  🙂