In
This Market, Communication is the Key
by Curtis M. Pearsall, Vice President, Agents' Errors and Omissions Department
Let me start off by asking you a question - how many of your staff have been through a hard market?
Realizing that the last hard market was over 15 years ago, that means that any of your staff that joined the industry since then probably don't know anything other than the soft market. Although there are probably no statistics on when people joined the insurance industry, I would venture to guess that many company personnel have never seen a hard market. Let's take this one step further - how many of your customers have ever seen a hard market?
If you have never been through a hard market, you may be inclined to believe that it is business as usual. Well, this is hardly the case. One major trade magazine said it very well recently with its title - "Starting Over". Another coined the phrase - "The Year of the Underwriter".
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Let's look at some of the characteristics of this market: Increased underwriting focus, including head count for workers compensation accounts - One company is also asking for the dependents and their ages. Companies are also much more focused on the aggregation of exposures. This includes property, liability, business interruption, auto, and workers compensation. Companies may not want the entire account. They also may not be willing to write the account the same way that they have in the past. Blanket building coverage is a good example. Many carriers are now only willing to write specific limits. Agents are not sure what type of business their companies want - This is reasonable in light of the question that can be asked - "Do companies know what type of business they want?" A more restrictive surplus lines
marketplace - In the past, the E&S
market served Increased pricing - No business is being renewed as is. What this all boils down to is the need to develop an effective communication dialogue with all of your business partners. |
heavily as the safety net for business that the standard
market didn't want.
Whether it is due to 9/11 or not, E&S companies are now carving
out their own specific niches. Their appetite has changed significantly.
Let's start with your staff. If they have never seen a hard market before, they are probably confused, overworked and totally stressed out. They need to understand why this happens and how to work through it. They need to know that the appetite of carriers changes. They should understand the need to check renewal policies to note what the differences are from last year. They need to know that the surplus lines marketplace is not the answer it used to be. A perfect setting for this would be a weekly meeting with your staff to "talk it out." The better they understand this marketplace, the more effective they will be in the communication with your customers. It is not business as usual and to avoid mistakes, agents would be wise to use this opportunity to educate and develop the staff.
Periodic communication with your markets is key. As an agent for your carriers, you need to know what type of business they want and what they don't want. What are they going to be non-renewing and why? What is the premium going to be at renewal? Many industry folks have commented that the companies that engage in extensive communication with their agents during this marketplace will be the winners.
Last but no means least is communication with your customers. If you were an agency that sold based on price, you are probably going to find things a little bit more challenging. However, if you sold based on relationship and value added, you will probably be a winner. Be open and honest with your customers. Explain to them the cycles of the insurance market and why it happens. Prepare them.
Many folks look at the hard market
as "doom and gloom." For the agents that have been communicating
with their staff, their markets and their customers, this marketplace
will provide serious opportunities.
Communiqué is published for our agent-customers for informational purposes only and is not intended to be, nor should it be relied upon as legal advice. Legal questions should be directed to your legal advisor.