I wouldn’t say drastically wrong.
I would and I did.
I am telling everybody, sometimes swans are black. Even if you can say truthfully that you have never seen one, you cannot ever say that nobody ever told you about them. I am telling you now.
And by that I mean that loss costs for Umbrellas are never 0. If you think they are zero or near zero, I promise you that you will one day see a big loss and say to yourself “Gee, I never thought THAT could happen!”
But you should have, because DP told you so.
I really wanted to discuss the umbrella underwriter’s effort, not the pricing actuary’s effort.
But I do agree with Deep, "one day you will see a big loss and say to yourself Gee, I never thought THAT could happen!”
My impression based on buying personal umbrella from multiple carriers over the years is that there’s not a lot of individual underwriting done on personal umbrella beyond the standard questions on potential risky exposures which you’ve already covered most of above. I don’t recall any underwriting questions on libel/slander type exposures.
Honestly, I don’t have a lot of experience estimating the cost of policy issuance, the marginal cost of underwriting effort, dealing with state regulating authority over rate filings, hourly pricing of underwriter time, the price of paperclips and staples in an insurance application, etc that Maphisto earlier mentioned. I understand that they are real and relevant.
I still cannot get over the pricing for my own umbrella policy from a MAJOR carrier.
Price of 1M UMB policy = $X (which I think is a bargain).
Price of 2M UMB Policy = 1.65 * $X ( Ok I get it)
Price of 3M UMB Policy = 3.65 * $X (The marginal price for a 3rd Mil is more than the total price of the 1st and 2nd Mils?)
You sound risky
Looks like an effort to prevent adverse selection at that highest limit . . . but have a need to offer that limit . . .
or a typo 