15% of commercial P&C policies no longer cover the right risk. Here is why.
By the time you read this, 1 in 6 commercial P&C policies on the market no longer reflects the policyholder’s actual exposure.
This figure comes from several million policies analysed by Continuity since 2019. It is not an outlier. It is a structural reality — silent, and compounding year after year across our books.
This is not a scandal. It is not the result of poor underwriting practice. It is the predictable outcome of rational trade-offs, made at every stage of the process, by skilled professionals having to cope with operational constraints.
The problem is not the individual decisions. It is what they add up to: a qualification debt building quietly inside our portfolios — at a moment when the market can least afford it.
Three mechanics behind a debt that builds in silence
Commercial underwriters are being asked to solve an equation that has no clean answer: write more, write faster, without compromising technical rigour.
Anyone who knows the speed distribution networks expect — and how complex commercial risks actually are — understands that these two imperatives cannot be fully reconciled. The industry has had to adapt. Or rather, to accept.
To accept that this tension produces a structural trade-off running across the entire commercial lines market: writing at speed means making decisions on incomplete information.
Three market mechanics drive this problem.
Delegated underwriting
Delegation rates in commercial lines are estimated at 70–80%. In practice, that means 3 in 4 policies are bound without ever being individually reviewed by a carrier underwriter.
This is not a critique of the delegated model. Binding authority arrangements enable scale, responsiveness, and geographic reach — they are a cornerstone of how commercial lines operates. But they also introduce structural distance between the risk on the ground and the underwriter carrying ultimate responsibility for it.
Brokers and MGAs typically manage dozens of product lines, most of them complex. Complete mastery across all of them is not a realistic expectation. The working model – at the lower end of the market at least – is familiar to everyone: the broker completes a risk submission form and sends it through a portal; risks that meet defined parameters are automatically bound.
These are legitimate business decisions, grounded in statistical logic and years of empirical data. But errors get through. Incomplete or stale data accumulates — quietly, consistently, across every line of business.
This issue of data integrity was raised publicly in 2024 by Rachel Turk, Chief Underwriting Officer at Lloyd’s, who called for more dynamic and digital portfolio management to address the growing obsolescence of insurance slips data.
This is not a niche market problem. It is a structural blind spot identified at the heart of the world’s largest specialist insurance market.
Underwriting cycle pressure
Speed expectations are no longer confined to personal lines or SME. Commercial underwriters are under growing pressure to turn around terms on complex risks within increasingly tight timeframes. According to McKinsey, leading insurers now deliver commercial quotes in one to two hours. Those benchmarks are becoming the new norm — and will define the acceptable standard across distribution networks going forward.
This structural pressure has a direct impact on risk qualification. Properly assessing a commercial risk — understanding the policyholder’s actual operations, validating declared information, identifying material changes since inception — cannot be done in two hours. It requires dialogue, verification, sometimes a site survey. Steps that are increasingly difficult to reconcile with the turnaround times the market now demands.
The dilemma is the same whether business is written through an intermediary or direct: respond quickly, or respond accurately. In practice, speed wins. The risk is qualified at inception on the basis of a proposal form, a questionnaire, an occasional inspection. Underwriting decisions are, almost inevitably, made on incomplete information.
Automatic renewal
The average commercial policy runs for five to seven years. Over that period, the insured business changes substantially. Operations evolve. Premises change. Headcount, turnover, and manufacturing processes shift. The policy does not.
This inertia reflects a business model in which renewal is primarily a retention exercise, rarely a technical one. The anniversary date is an opportunity to retain the policyholder, renegotiate terms, and sometimes adjust premiums. It is rarely an opportunity to re-underwrite the risk from scratch.
Yet risk is not static. Property is the most extensively documented example. A Kroll study on commercial property valuations found that nearly 90% of the buildings assessed were underinsured — in 68% of cases by at least 25%, and by more than 100% in 19% of instances. These figures relate to asset values, but the same dynamic applies to operational cover.
An insurer writing what it believes to be a joinery business discovers that the operation has pivoted to sawmilling — a risk profile one hundred times more hazardous. A gasket manufacturer begins supplying the nuclear sector. Solar panels are installed on a warehouse roof. A restaurant becomes a nightclub. And the list goes on. This is common practice.
Why these mechanics are more dangerous today than they have ever been
None of this is new. What has changed is the environment in which it operates.
For several years, commercial P&C ran in a hard market. Successive rate increases generated underwriting margin. That margin absorbed surprises — including those arising from misclassified risks. The market could afford its blind spots because it had the profitability to absorb them.
That period is over. Most of 2025 was characterised by rate softening across virtually every line and geography. The Swiss Re Institute projects the US commercial lines combined ratio at 98.5% for 2025, rising to 99% in 2026 — against 96.3% in 2024. Beyond the US, these figures point to a clear global trend: margins are tightening, and the buffer is vanishing.
In a hard market, rate increases create a buffer that absorbs adverse development. In a soft market, that cushion disappears. A severe loss on a misclassified risk can no longer be absorbed by portfolio growth. It hits the bottom line directly. To put this in concrete terms: we estimate that 0.5–1% of risks in any given portfolio carry an aggravated exposure that has never been properly qualified. Cumulatively, those situations cost one to two points of combined ratio every year — a material share of underwriting profitability.
The silent drift is not a market cycle issue. It is a structural problem that the cycle makes harder to ignore: less margin to absorb adverse outcomes, and more competitive pressure to bind risks without properly assessing them.
The silent drift is not a market cycle issue. It is a structural problem that the cycle makes harder to ignore: less margin to absorb adverse outcomes, and more competitive pressure to bind risks without properly assessing them.
Where does that leave us?
Delegated underwriting, cycle pressure, automatic renewal — all three mechanics reflect rational decisions. But we need to be honest about what they produce collectively: a qualification debt that appears nowhere in our management information, and compounds silently year after year.
We need to close the gap between the portfolio we think we have and the risk we are actually carrying.
This is not a process problem. It is a visibility problem.
If we are going to drive faster, we need our seatbelt on. The underwriting safety belt exists.
References
- Insurance Journal, October 2024
- McKinsey, AI in insurance: Understanding the implications for investors, February 2026
- Kroll, Current Trends in Property Insurance Valuation, 2023
- McKinsey, How commercial lines is weathering a period of uncertainty and change, January 2026
- Swiss Re Institute, US P&C outlook, April 2025
