The talk is over. The market is turning. It is not sweeping the entire country. Certain classes of business can be considered as hardened; many fall into the very firm market. Difficult classes are led by nursing homes followed closely with trucking, workers compensation and property in certain geographical areas.
In January many of the reinsurance treaties will be renewed. Some of these contracts will be coming off of two-year deals.
As Max Taylor, chairman of Lloyd's of London, told Rough Notes at the most recent NAPSLO convention, the reinsurance market is running a combined loss ratio of 118%. This will probably reflect in a price increase of 5% to 15%. Certain classes will see much larger increases. Lloyd's of London is very positive about the U.S. surplus lines market according to Taylor. It represents a third of Lloyd's premium income for 1999 and a 19% growth of their business from 1998. High on Lloyd's priority list of attractive classes of business are technology risks, weather-related risks, D&O, and recall cover (no tire manufactures).
Canada represents Lloyd's second market. Taylor stated they were involved in both Canada's personal and commercial lines products. Australia's insurance market also appeals to Lloyd's. Among the reasons, according to Taylor, is their lean and efficient distribution system.
Lloyd's goal, Taylor said, is to explain to agents and brokers "who we are, what we are and what we can do" Taylor said.
The Internet has shrunk the world and our industry. The 38th edition of The Insurance Marketplace for 2001 will contain not only 842 insurance markets, including regional listings, for the United States but will contain a Canadian/International section with 84 listings located in Canada, Europe, Asia, South America, Africa, and Australia. New categories include United States Longshoreman's and Harbor Worker's Compensation Act (USL&H), Internet, phone card, and media promotions coverage.
One Canadian broker, Cross Border Underwriting Services, Inc., CBUS (Chicago), offers Canadian brokers access to covering homes, condos, and seasonal dwellings owned by their clients located in the United States. Coverage is written by Chubb Insurance Solutions Agency, dba The Chubb Access Program. The program is available in 48 states.
This is not an isolated case. U.S. agents and brokers are developing programs for many of their insureds to solve international exposures. Many agents are surprised to find that their clients have overseas exposures that are not covered or that they are not even aware of. The old saying "It's a small world" was never truer.
As insurance companies rethink their target markets, many will decide that certain classes of business do not fit their specialty classes of business anymore. In some cases, they didn't fit the first time. Reinsurance treaties may dictate that decision. Where do you place that client? MGAs, MGUs, program administrators, surplus lines brokers, or syndicates are going to be the players in that arena now.
This situation lends itself to other problems. After the last six to eight months of "firming," these markets for the most part are swamped with submissions. Since 1985, the downsizing has left the industry with fewer people to process business and even fewer who are experienced in "hard" market underwriting. If it is a last minute attempt to move the account, there may not be ample time to underwrite and quote.
An agent who anticipates that the existing carrier will renew may be in for a shock. With new underwriting philosophies changing on a daily basis, your client's class of business may fall victim to new corporate guidelines. Plan at least 30 days to find a new market. Carriers and specialty markets alike are requesting more loss and client information than in the past. In other words, the accounts are being underwritten.
E-commerce can be competition, especially if it bypasses the agent. One way to compete is to establish your own Web site. In a recent independent survey of independent agents conducted for Rough Notes magazine, 47% of those participating indicated that they have an agency Web site. Agencies with Web sites must be careful to specify the states where they are licensed to write business. The Web site should be constructed to direct prospects to the agency where the agent can qualify the risk, obtain the best coverage and establish a relationship with that client. Web sites do not "sell." Some people may "buy" and then it is only on price alone.
In the case of "client to dot-coms" bypassing the agent, whom do insureds file the E&O claim against when they, the insureds, made the coverage selection and did not purchase adequate limits? Themselves? It may be the same as the old maxim: "The person who represents himself in court has a fool for a client." Professional agents must make the prospect aware of their value in advising as to what coverage and limits to purchase. Should they obtain higher deductibles? What loss prevention measures can be taken to minimize future claims? Advise and consult. The dot-coms don't do that.
At the most recent International Insurance Societies conference, Maurice Lippins, chairman of the board of directors of FORTIS, described what he called a "nimble incumbent." "Nimble incumbents know how, where and when to move. They exhibit a healthy sense of urgency and know how to pace themselves." He was referring to companies, but doesn't this apply to agents also?--knowing what products are available, which clients have a need for them, and advising why your client's assets will be protected because of your professional advice.
The Rough Notes survey showed sales of professional liability were up 10% over the past 10 years. In that same period of time D&O increased 13%, EPLI 7%, and special events 12%. These categories also were ones that showed growth in the number of markets available in The Insurance Marketplace during that same time span.
The 38th edition of The Insurance Marketplace is available free. It is mailed to Rough Notes magazine subscribers along with the December issue. Electronic copies are available at the following Web sites: www.insurancemarketplace.com
and www.roughnotes.com and on the Rough Notes Agency CD-ROM and SilverPlume CD-ROM. For further information call (800) 428-4384;
e-mail: rnc@roughnotes.com or fax (317) 816-1000. *
1. The market is firming in most classes and hardening in a select few.
2. Our industry is "borderless" today.
3. Surplus lines markets will play a bigger part of your book of business.
4. Some classes of business will move to specialty niche markets as carriers retreat to their core business.
5. Clients will expect more than a policy from their agent/broker.
6. E-commerce will be a greater competitor.
7. Submissions will be underwritten more closely.
8. Waiting until the last minute to market a renewal could result in losing the account as markets are swamped with submissions.
9. If you were not in the business prior to 1985, find someone who was and "adopt" him/her. You will need that person's hard market experience.
10. You will need more tools to achieve your sales goals.