The insurance industry has faced the most significant digital revolution in the recent decade, completely changing how real estate portfolios are underwritten, bought and sold. In a hardening market, with narrowing carrier appetites, this puts pressure on real estate transactions to be adaptive, competitive and meaningful with terms and conditions provided.

The most significant barrier to meaningful terms and conditions is the quality control of submission data between parties. A quality submission, or lack thereof, could make or break a business relationship or a sale between parties.

How does the quality control of submission data play such a pivotal role? "It starts and ends with a good submission," says Joe Quarantello, senior vice president, National Environmental Practice Leader, Risk Strategies. Submission quality for a risk sets the foundation for a win, whether it's for a broker to an insured, an underwriter to a broker, custom-designed technology systems for underwriters and brokers, legal team to brokers, and so forth.

The revolution of technology, constant quality control of submission data, and the heart of insurance— utmost good faith—are fundamental to creating favorable outcomes among partners in real estate transactions. A group of experts answered the burning questions on submission quality in real estate portfolios.

Disorganized Data

In an airing of grievances at an underwriter's Festivus—see “Seinfeld," season 9, episode 10—the most pronounced undoubtedly has to be: Why does the schedule of values (SOV) never match the environmental site assessments?

The amount of time and energy that all parties spend reviewing and analyzing data in submissions is highly inefficient. “I really think that people in the real estate portfolio world for environmental insurance spend half their time battling organization of the submission," says Michael Gill, Partner, Synapse Services LLC. “This has been an ongoing issue in this space for as long as I have been in environmental insurance."

The disorganization of data is one of the biggest barriers to thoughtful terms and conditions. How can the most crucial part of the submission be given the least amount of time in a portfolio presentation?

We have all heard the term “time is money," and when accessing a deal or opportunity, presentation is everything. Thoughtful presentation of data by default shows receiving parties the seriousness and professionalism of the presented portfolio. In transactions like real estate portfolios, there will always be teams of experts on the opportunity.

An organized presentation of data is the equivalent to dressing for success. Equally, the result of an unorganized submission with a lack of data can portray a lack of seriousness or indicate a lack of controls in place to receive the necessary data to offer the best terms and conditions for that risk. A great rule of thumb is to lead with your best submission foot forward.

Industry Experience

This isn't to say that meaningful terms and conditions are not given ample consideration by underwriters, even if some submissions resemble Swiss cheese rather than a real estate portfolio.

Industry knowledge and experience play a crucial part. “In the past, underwriters understood these real estate portfolios' risk historically and industrial usages were underwritten to that historical knowledge. But with emerging contaminants, you are also going to get more questions," says Hiral Shah, senior vice president, Environmental Sompo Global Risk Solutions. For example, different kinds of industrial use indicate potential exposures that need to be underwritten.

“Many emerging contaminants are changing in the marketplace now, not just the usual ones we hear about," Shah says. “Today, there's more of a renewed focus around the tenant uses, what kind of tenants are being brought on, [whether] they have environmental insurance in place—that data is even more pertinent now to the underwriting review."

In bridging data gaps in submissions, “the most effective broker knows their client and obtains the information needed, whether that be from a principal of the insured, the risk management department, the legal department or the operations department," says Marcel Ricciardelli, senior vice president, Allied World Environmental and Design Professional Divisions.

Established relationships and knowledge of risks can eliminate a substantial amount of rework between the broker and the underwriter. If brokers can collect the information to the underwriting questions that would impact the terms and conditions, it results in the best terms and conditions.

Equally important is that the portfolio presentation recap all information collected—and information not presented—that the client provides. Setting expectations and timelines on data collection also shows the professionalism and seriousness of the broker toward the proposed risk or portfolio.

Timing and Tech

A silver lining to data and submission presentation is that “a perfect submission does not need to be onerous to put together," Shah says. “It's just the timing of the work as to when you're going to do it. Either before the submission, after the submission or after binding."

Environmental insurance industry leaders unanimously agree that underwriters must include certain criteria in a submission. Accurate and organized information should include:

• SOVs.
• Loss runs.
• Environmental site assessments and current reports.
• Ensuring the number of sites on SOV correspond with assessments.

Specialized technology also helps improve submission quality in real estate portfolios and can play a considerable role in handling an organization's "grunt work." Most organizations have a digital ecosystem of software they use to harness, sort and exploit data to maximum capacity and efficiency. But with any run-of-the-mill technology, there are also barriers to the degree to which the best results from software can yield the best results.

The history of insurance industry technology shows that the information needed has remained the same, but the way the information is collected has been revolutionized. In the 1990s, businesses upgraded from yellow pads and dusty physical data rooms to passing around Excel spreadsheets for property lists and electronic Word or PDF documents. Today, data transmission is primarily via email and file transfer protocol (FTP) sites. However, file size limits and "bucket-of-docs" architecture make downloading laborious.

From a brokerage standpoint, “previous technologies never solved the unanimous issue of inconsistent file naming and the constant fear of carriers not receiving information, which could result in losing a deal from a brokerage standpoint," Quarantello says. “The amount of time and energy spent on handmade Excel spreadsheets leaves far too much room for human error, especially if the real estate portfolios are consisting of 20, even 30 or more sites."

In utmost good faith, insurance brokers should never make the underwriter make assumptions on the risk. This is when things can be misunderstood to the detriment of terms and conditions and, ultimately, your insureds.

"There is value to communication around what are must-haves or the priority of the information needed," Shah says. “This goes hand in hand with the submission quality."

Quality Characteristics

So what are the characteristics of a quality submission? A master property list with good addresses is fundamental, as is a complete list of engineering documents. But there are plenty of portfolios underwritten on mismatched spreadsheets with missing documents.

According to David Oldow, principal at Griptiller LLC, there are two important steps to sharing solid submission data between transaction partners:

1) Data gathering. Brokers sort and reconcile data provided by their clients to get an understanding of the risk as well as the quality and completeness of the supporting data. Miscellaneous docs are culled, a master property list is confirmed, and the age and quality of reports are noted. This is a great opportunity to work with the client to perfect the data.

2) Data presentation. The data is presented to the market to ensure a quick understanding of the risk, including making it easy to download. Underwriters with a good picture of the portfolio can quickly calculate their underwriting workload and get into the documents. Speed, accuracy, communication and efficiency improve when manual processes are digitized.

Have crucial conversations with all transaction partners to yield the best terms and conditions. Presenting the Swiss cheese equivalent of a submission may result in the Swiss cheese equivalent of terms and conditions.

If you are providing a quality submission through organized data, using custom-designed technology for real estate portfolio transactions and maintaining utmost good faith, it only results in "better business relationships that work together innovatively with trust and credibility for all partners," Quarantello says.

Angela Oroian is vice president & executive managing director of the Society of Environmental Insurance Professionals (SEIP), a 501(c)(3) nonprofit association dedicated to helping its members utilize environmental insurance products to provide more valuable services to their customers.

SEIP enhances the professional capabilities of its members through focused educational forums, technology-enhanced knowledge management and access to specialized multi-disciplined resources in fields related to environmental risk management.