Familiarise Yourself with the Risk
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Familiarise Yourself with the Risk book
It is difficult to overemphasise the importance of familiarising oneself with the risk one is trying to price before delving into the technicalities of pricing (Figure 7.1), and still it is difficult to write something sufficiently general about it. This is the phase of pricing that is least susceptible to being automated, as it requires getting to know your client* (whether you are the underwriter, a broker or a consultant) with a mind that is as open as possible. There is no real prescription but what you want, in a nutshell, is to make sure that whilst you eagerly apply what the underwriters and the brokers call with some complacency ‘your actuarial magic’ to the numbers you are provided with, you do not ignore the context in which your client operates and the potential risks it faces.