Oh no, what do I do?

By Ken Kukral

As the market hardens, there will be issues that you will have to address.  More and more accounts will see price increases, change in terms and conditions and non-renewals.  Your clients will be alarmed if you have not prepared them for the forthcoming changes.  So what should I do?

1.     First communicate that the market is in a state of flux and that price increases are on the horizon if not already at the front door.  Let them know roughly what to expect and let them know how you think they should be handled.  Certain lines such as property and workers compensation are seeing more increases than casualty and umbrella lines of coverage.

2.     Let them know how carriers need to react to the pricing changes.  Depending on what state and what line of coverage the carrier may need to send specific notice by a specific time prior to the renewal in order to raise the price.  In looking at a recent report I see notification requirements as low as NO NOTICE all the way up to a 90 day notice.  In the absence of this notice, the carrier may be limited to the amount of rate increase they can get.  (some states allow for the extension of the expiring policy at the “old rates” in order to comply with this notice requirement and some do not!)  So when new business comes to your door looking for coverage, please make sure they were given proper notification so you know if you can buy them some time.

3.     Many states also have requirements for the type of notice and the timing of the notice for non-renewals.  Look first at the policy provisions regarding non-renewals and then research your state insurance code for the specific state requirements.  Carriers that figure out a week or two out that they want to non-renew an account still need to follow the rules.

4.     Keep in mind that in many states, excess and surplus lines policies do not have to give non-renewal notices or significant increase in premium notices.  They are exempt from these regulations.  If their policy has specific provisions they have to follow them, but in the absence of them they can do what they want.  Check this out when writing a policy in the E&S market.

5.     Start your renewals further out.  Communicate with the carriers and clients on what is going on so that both them will have their expectations met.  Many carrier will say something like we want to get roughly a 10% price increase on this account or on your whole book of business so let your clients know they will have a reasonable price increase in their future.

6.     Discuss other ways to reduce premiums such as higher deductibles, packaging policies or reducing specific coverage (such as physical damage on a 15 year old vehicle).  This will help soften the blow.

7.     Weed out your own book of business and eliminate unprofitable accounts.  If your loss ratio improves with carriers, they will be less likely to push for more increases.  You may find that “problem” accounts are taking too much of your time and are hurting your overall loss ratio.

8.     Review terms and conditions on renewal quotes to confirm that the coverage has not been weakened or reduced.  Clients will always say “I didn’t know about that change” after a loss.  Discuss any reductions in coverage and make sure you document your files.

9.     Be ready for “classification” or book of business non-renewals.  If a carrier is experiencing a poor loss ratio for a certain type of business such as habitational business, start searching for a new market long before they start sending out the non-renewals.  By doing this, you will be doing the best job for your client.

10.    Keep your ears and eyes open.  This is not time to stick your head in the sand and pretend it is not happening.  Your clients count on you to be informed and keep them informed.  It is when they are surprised that they will then look to find a new agent.

We are already seeing a lot more accounts that have been non-renewed.  It takes a little more effort to place those accounts but it is worth it.  Step up your game by reviewing loss runs and detailing out when, where and why the claim happened and why it shouldn’t reoccur in the future.  Add more narratives to your submissions and make sure the underwriters “get the rest of the story” so your accounts can be seen in the best light possible.

There will always be insurance “cycles” and how you deal with them will allow you to grow in both a hard and a soft market.

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