A Christmas Case Study: Underwriting Santa’s Workshop
At Kalepa, we help underwriters review complex submissions every day.
But underwriting Santa’s workshop? Well, that’s a bit out of the ordinary.
Never one to back down from a challenge, we wanted to explore how we would evaluate a submission from Kris Kringle himself. To be clear, we’ll just be looking at Santa’s commercial P&C policy today. We can’t even fathom the life insurance premium for a portly 1000+ year old man living in the arctic circle — and don’t get us started on his ho-ho-homeowners policy.
So let’s get down to the real question — does Santa’s workshop make it on the nice list?
The North Pole
First of all, Santa chose a terrible place to build a business. It’s hard to think of a location more vulnerable to CAT events this side of the Bermuda Triangle. Months of blizzards, high winds, and extreme cold pose major risks to the physical structure and ongoing business operations.
Things aren’t looking up for Santa either. Climate risk poses a major threat to insurers, and the North Pole isn’t exactly immune. We’ve all seen enough videos of polar bears at the ice caps to know that Ole St. Nick is in trouble.
Speaking of polar bears, our rating for the farm policy should account for the presence of apex predators directly next to Santa’s reindeer stable. Frankly, given that his product distribution is reliant on the health and wellbeing of nine draft animals, this seems like a major oversight.
We need to talk about the workshop. Employing a small army of blue collar workers in frigid manufacturing conditions is a recipe for OSHA violations. Plus, with all the snow and ice, the workshop is bound to be a hotbed for slip and fall claims.
The big guy will definitely want a hefty product liability policy, given the billions of toys the elves pump out each year — there’s certain to be something wrong. Remember all those hoverboard fires in 2015? Or the 10 million Power Wheels that were recalled for catching on fire back in 1998? Sounds like the elves are slipping in more ways than one.
Santa’s finances should also be called into question. For all the presents he designs, manufactures, and delivers, the man’s primary revenue stream is milk and cookies. Third-party data sources should be consulted to further vet Santa’s creditworthiness and make an accurate rating decision.
When it comes to Santa’s delivery operations, we need to take a look at the fleet risk. First things first — operating an aging open aircraft vehicle with no seatbelts and a rudimentary, animal-based navigation system for cross-continent high speed travel is probably outside of guidelines. To Santa’s credit, he does have plenty of driver experience.
But we need to go deeper, and third party data sources can supplement our understanding of the true exposure. Government data sources like NORAD Tracks Santa provide a much clearer view into his big annual trip. On top of that, his motor vehicle records are bound to reveal some egregious speeding tickets. Santa must have a lead foot to be traveling to hundreds of millions of homes in a single night, and planting your vehicle on someone else’s roof is usually enough to elicit a parking violation and a few points on your license.
Lastly, let’s not overlook the submission documents — rumor has it there’s an alarmingly large loss lurking in the loss runs.
Wrapping It Up
All told, Santa’s operation is a tricky one to underwrite. But if you wanted to do it better and faster, you should try it in our Copilot workbench — we’ll help you understand the true nature of Santa’s risk so you can bind with confidence.
Despite the many issues with Santa’s business operations, we remain ever grateful for the joy he brings us every holiday season. (Let’s just hope he can clean up those OSHA violations).
Happy Holidays from all of us at Kalepa!