By Ken Kukral
A recent article in National Underwriter Magazine asked this question of carriers and wholesalers across the country and I thought I would chime in.
1. More “activity” – By this I mean more uncertainty. When you go to place an account with one of your standard markets there will be less certainty that they will write the account or quote it competitively. You may need to “hedge your bet” and get it out to the E&S market “just in case”. This will save you last minute dealings which may result in terms less favorable to your clients or potential clients.
2. More underwriting – Submission quality will need to increase and the better the submission, the better the chance you have to get favorable terms for your client. While submission quality should be a priority at all times it will become even more important as things shift.
3. Pricing changes – Some accounts may have flat renewal pricing or small increases. I hope you have been preparing your clients for this change in the cycle. With a few exceptions, the pricing changes should be manageable.
4. Increased numbers of non-renewals or “conditional non-renewals” – This goes back to number 1 above. Clients may get nervous and go out to shop their account since they are no longer “certain” their pricing will be similar to their expiring pricing. Start renewals early and cut this problem off at the pass. Communicate with the client more often and let them know where things stand. Communication can many times reduce their anxiety and deflate their need to go out and shop their account. We are already seeing this with certain classes of business. A large national direct writer has already decided that they can not make money on writing churches in Florida and has non-renewed their existing book of business.
5. Commission cuts? Not sure about this one but it wouldn’t surprise me. Especially on lines of coverage that are not profitable for your carriers. Keep a sharp eye on this one.
6. Catastrophe losses? 2011 was a record year with out a major hurricane (unless you count the flooding from Irene). Property lines could change significantly if a couple hit this year. Worldwide catastrophes are having an impact as the insurance world goes more “global” and will start to drive reinsurance pricing up. Many more areas of the country are popping up as being potential disaster areas (Earthquake in DC, major tornados in Missouri) and you may see some pressure to change wind deductibles to percentage deductibles like you see on the coasts.
7. Continued hardening in certain lines – Workmen’s Compensation and Homeowners have been two lines that have had below par results for a few years and the carriers have been raising prices, tightening underwriting guidelines and tinkering with their book of business. Results have not improved enough to see a change here. This will be a continuing methodical changes and the increases should be able to be salable to clients.
8. Some isolated carriers “getting into trouble” – We saw some of this in 2011 with the increase in catastrophe losses. Keep an eye on your carriers and make sure you don’t get caught sleeping. Deal with it on a case by case basis and be proactive with your plans when it does happen.
Much more of the same. The factors needed to bring on a “hard market” are not all there. While “cat losses” may have increased last year, overall results are not bad enough to bring about a major shift in pricing. There is still too much capacity in the market and unless that dries up for some unforeseen reason there will not be much of a change.
9. Continue to work smarter – Look at efficiencies in placing business, determine if you want to “fire” clients who lose you money and find niches where you can capitalize on your expertise. Don’t be complacent and look to improve your operation in all areas that you can so you get bigger, better, faster.
10. As we have said for a number of years, the market is what the market is. There will always be opportunities if you search them out. Ask for the business and you have a much higher chance of closing sales. Make sure you “activity” is smart activity and you are doing the “right things” to generate business. If the “old way” doesn’t work anymore, then change it.
11. As we head o the holiday season, I hope you had a successful 2011 and hope you plan on having an ambitious 2012. Enjoy family and friends and reach out to the less fortunate. We wish you a joyous holiday season and continued success.