The September 11 attacks have at least made the US insurance industry more disciplined in its approaches to underwriting, but no one knows how long that will last. A forum in New York of property/casualty insurers hosted by the Insurance Information Institute has found that stricter underwriting practices have paved the way for what might become a long-term change in attitude. Rates were rising about 10-15% pre-September 11, and have since doubled, with higher risks attracting higher rates.

Participants in the forum said the September 11 attacks finally forced the US industry to admit it had let things get a bit out of hand. In the words of Liberty Mutual President Edmund Kelly: “The industry has destroyed more capital through mismanagement than terrorists ever did.”

New York is a cynical place, but brokers in Australia would probably agree with the observation that low stockmarket returns are the best way to keep things tight and profitable. Mr Kelly suggested technology needs to be used more to standardise risk data and curb the temptation by “desk underwriters” to take a hit or miss approach to proposals.

But he warned that the biggest threat to maintaining profitability long-term isn’t the big players; it’s the middle-sized insurers who are more likely to “throw underwriting out the window and give business away” as they compete for bigger slices of particular markets.