Turning Claims into Opportunities: How to Present a Business Case to Underwriters

Claims are an outcome of business operations.  Underwriters know that.  What they don’t know is exactly what the numbers on the page are telling them about the business.  Was it bad luck?  Was it an act of God?  Or is it a symptom of an underlying problem that needs to be fixed?

When you have an increasing number of claims, it becomes increasingly unlikely that the root problem is an “Act of God.”

The only way to help an underwriter understand what happened and then feel comfortable with the situation is to craft a narrative that acknowledges the problem, then presents a solution.  Many times, that solution is an underlying business problem that may take real work to fix.

The owner of an auto repair shop that is very forward thinking

Understanding the Root Cause of Claims

Claims are often symptomatic of deeper operational issues within a business. An underwriter’s job is to assess risk, and if a business has a history of frequent claims, it naturally raises concerns. However, not all claims are created equal, and a business’s response to them can make all the difference.

For example, I was working with one of my clients.  They were an auto repair shop with two locations.  They were being non-renewed by their current carrier for claims.  The loss run report wasn’t very pretty.  It was an auto repair shop with 2 locations, and 12 claims in the last 2 years.

The Nature of the Claims

This auto repair shop had two main types of claims that were causing concern for underwriters:

1. Customer Vehicle Damage Claims: The shop had five separate incidents where customers’ engines were damaged due to improperly performed oil changes.

2. Workers’ Compensation Claims: The location had seven workers' compensation claims, signaling potential workplace safety issues.

   
   

At first glance, these numbers painted a troubling picture. From an underwriter’s perspective, this indicated a high-risk business with systemic problems. However, understanding the broader context changes the narrative.

What I Learned After a Conversation With The Customer

I’ve worked with this client for more than a decade, so when I looked through the report, I was viewing the claims through the context of their growth story.  I knew they opened a second location about 3 years ago, and that was when the claims started to occur.  I speculated the claims might have been occurring at the new location.  That was wrong.

It turns out that every claim on record had occurred at the old location.  That location is one of the busiest stores in the country with this brand, servicing 80 cars a day.  People sit in line for 45 minutes to get their oil changed at this store. 

The underlying problem was clear—an overworked and understaffed team struggling to keep up with demand, leading to errors and workplace injuries.  On top of that, there has been turnover at the manager position at this store, creating a leadership void.

The sheer volume of work at this location meant that mistakes were more likely if the staff wasn’t adequately trained or supported. The claims weren’t due to incompetence but rather operational strain.

Why the Standard Fix Isn’t Enough

To a hammer, the solution to every problem is a nail.  And for the insurance industry the solution for claims is very often policies and procedures and training.

The problem is that training isn’t very effective.  Think about the last training video you watched.  How closely were you paying attention?

When you solve business problems, the solution must be multi-faceted.  If the problem is morale, then you have to address morale.

In this situation, the business leader had identified several issues – there was a leadership void, and the quality of employees needed to improve, as well as a stricter training regimen.

A Comprehensive Plan for Risk Mitigation

The auto repair shop leadership recognized that the root cause of the claims wasn’t just individual employee errors but rather a structural issue within the business. Their response involved several key changes:

1. Hiring a New Manager: Leadership is crucial in managing risk. The shop decided to bring in a new manager with a strong track record in operations and employee development. This move was intended to bring better oversight, streamline processes, and improve accountability.

2. Improving Employee Compensation: High turnover and difficulty in retaining skilled workers contributed to mistakes. To attract and retain higher-quality staff, the shop committed to paying higher wages. Investing in employees leads to greater engagement, reduced errors, and improved overall service quality.

3. Implementing a Stricter Training Regimen: While training alone wasn’t the sole solution, improving the depth and frequency of training was still necessary. Employees would now undergo more rigorous onboarding and continuous education to ensure they had the necessary skills to perform their jobs effectively.

4. Reducing Workload by Shortening Store Hours: This adjustment allowed the business to maintain better staffing levels relative to demand, reducing the risk of rushed or careless work. Slowing down operations slightly ensured that each job was performed with the highest attention to detail.

   
   

Communicating the Solution to Underwriters

Now that I had this solution in hand, I could craft my narrative for underwriters.  The truth is that underwriters need to write business to hit their growth goals, but that business also must be profitable.  If you can provide a narrative to the underwriter that can explain the claims, along with presenting an offer where the company would have made money, you have a much higher chance of getting coverage.  In this scenario, I presented the narrative from above, and I also offered several more lines of coverage that had been profitable to sweeten the pot for the underwriter.  This strategy helped prevent a much more catastrophic renewal scenario.

When approaching an underwriter, the key points to communicate include:

• Acknowledging the Problem: Transparency is critical. Admitting that there was an issue shows awareness and responsibility.

• Explaining the Root Cause: Providing context beyond just the claims history helps underwriters understand the underlying operational challenges.

• Detailing Corrective Actions: A clear, well-structured plan for preventing future claims demonstrates a proactive approach to risk management.

• Highlighting Investment in Improvements: Whether it’s new leadership, better wages, enhanced training, or operational adjustments, showing that the business is investing in improvements reassures underwriters of its commitment to reducing risk.

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The Takeaway for Business Owners

If your business has had claims, the worst thing you can do is ignore them or hope an underwriter won’t notice. Instead, take control of the narrative. Show that you recognize the issue, understand why it happened, and have taken meaningful steps to prevent it from happening again.

Underwriters appreciate businesses that take a proactive approach to risk management. By framing past claims as learning opportunities rather than just problems, business owners can increase their chances of obtaining or retaining coverage—even in challenging circumstances.

Final Thoughts

Insurance is not just about protecting against risk; it’s about managing and mitigating it. Business owners who can demonstrate a commitment to improvement and long-term stability will always have a stronger case when working with underwriters. Whether you’re running an auto repair shop or any other business, the ability to analyze past claims and implement effective solutions can turn a challenging insurance situation into an opportunity for operational excellence.