Meet Mary. Mary is a modestly-sized insurance agency owner who heeded all the warnings around the uncertain future of personal lines, and has spent the last few years diligently building her agency’s small commercial book. She researched potential industries to target, and specialized in a particular class to reap the benefits of being the insurance agency expert for that industry.
Mary built relationships. Attended industry events. She did it. Mary built a profitable book that is considered stable, less price-sensitive and is now attracting other like-accounts.
Then Mary got the word. Her insurance company that was all too eager to reap the benefits of small commercial is pulling back from that particular sector. All upcoming renewals will be non-renewed. Mary’s clients will receive notice and she will need to find new markets.
What happens when your target moves?
Mary may be hypothetical, but her predicament is not any less real or dangerous to the agency owner who may not have access to a diverse number of markets.
Reduced capacity can occur in a number of varying forms:
- Insurers not wanting to take 100% of the risk, forcing agents to find additional insurers to provide full coverage to their client on a co-insured or layered basis
- Carefully reviewing all new business, or often not accepting any new business in a particular class and/or region
- Premiums rising by double or more as the markets pull back from a particular industry
- Similar to Mary’s case, insurers may decide to discontinue underwriting a particular class of business altogether
For a small agency with limited access to markets, changing appetites can have devastating consequences. Moving a book costs money, is time-consuming and can cost the agency clients– either due to price or lack of a market altogether.
Don’t let what happened to Mary (and her clients) happen to you.
Seek out additional markets for your small commercial book, and secure a source for insurance programs and specialty markets. Don’t assume your personal lines business is immune to this situation. If you have a limited number of markets for your high net worth, coastal or flood/wind-prone clients, the day may come when that business will need to be placed elsewhere.
Develop good relationships with wholesale brokers. Regardless of where the insurance industry is located on the hard or soft market cycle, wholesale brokers are a much needed asset to retail agents. While commonly considered as a source for hard to place accounts, in a competitive market accounts that may meet standard market criteria may actually benefit from broader coverage for the same price in the E&S market.
No one can guarantee or predict what the P/C market will look like, or where we will find ourselves in the underwriting cycle to come, but having access to a number of diverse markets can provide agents the flexibility to act when markets change.