Agencies around the country are reporting a wide range of issues due to the hard market – including increased premiums, reduced capacity, restrictive policy terms, and stricter underwriting from the carriers.
How an agency deals with the hard market affects its bottom line. Here are several “best practices” to note:
AGENCY STAFF
- Counsel your staff on how to deal with clients that may be experiencing large rate increases or coverage reductions.
MORE RESTRICTIVE POLICY TERMS
- Communicate to your insureds that they may see changes to coverage and should review their renewal terms carefully. Tell insureds you can assist them with securing alternate terms if you have alternative markets available.
- Communicate in writing to your clients about what their upcoming renewals will look like and what they can expect in the way of pricing and coverage terms. It’s better to be general than specific. Explain that they should expect changes, review renewal terms carefully, and reach out to you if they want to discuss the changes or pursue terms through other markets. If you note specific changes to an account, it’s possible to miss something which subsequently becomes an E&O claim.
- Note any coverage changes to clients in writing when providing the quote if you are presenting the renewal terms.
- Keep in mind that while admitted carriers will generally need to give notice when they are reducing coverage, surplus lines carriers are not required to do so. You might find a new exclusion or coverage change when you receive the renewal proposal, leaving you with little time to secure alternatives. Be proactive about asking your wholesalers/surplus lines carriers what type of policy coverages to expect on renewals. Do not assume they will point out any changes to terms on the renewal quote – review these carefully for changes. (Find additional information in our December 2023 R&O Risk Management newsletter.)
CLIENT REQUESTS TO REDUCE COVERAGE/LIMITS
- Document and memorialize discussions with clients when they look to reduce their limits or coverage to counteract the price increases they are experiencing. Note these discussions in your agency file and back to the customer by email or letter.
MOVING COVERAGE TO A NEW CARRIER
- Compare the expiring coverage and the proposed replacement coverage and bring any differences to the clients’ attention. Supplying the insured with specimen forms and encouraging them to read their policy are also strongly suggested.
The hard market affects virtually every agency. The better prepared your agency is for all of the issues you will face will determine to what degree your agency is affected.
How much does a supplementary or optional extended reporting period cost? ERP rates vary by carrier. The rate is calculated using your most recent full-term premium multiplied by a percentage based on the number of years of ERP coverage you are purchasing.