Special Section sponsored by

CARRIERS

“People aren’t shopping their programs as they did before. People want to maintain relationships because of the soft market and the troublesome stock market.” —David Springer President NIP Group

In the early part of this decade, property and casualty insurance companies were not particularly receptive to the program insurance concept. Insurers had experimented on their own with various types of group programs before with less than stupendous results. Now, managing general agencies were asking them to follow their group approach, which they called “program business.”

Agencies won carriers over, eventually, and program insurance was beginning to grow. Then came the soft market, and insurers sought aggressively to take on more program business to bring in more premium dollars.

Today, we still have a soft market, although some industry solons say it is stabilizing. But we also have poor results for carriers on the investment end and a faltering economy. How has all this affected carrier interest in program business?

“Carrier interest in program business is strong,” says Richard Suter, assistant vice president of program business development for The Hartford. “The program market has remained active, throughout the soft market. We do specialty programs as well as captive programs, and we’ve seen a strong trend towards agency-owned captives. Insurers are collaborating with program administrators to help them replace lost revenue. One way we can do this is through program administrator-owned captives. Carriers can help agencies establish these facilities and then provide services, bundled or unbundled to help them thrive.”

Ron Molatto, divisional senior vice president at Great American Insurance, says that his firm is open to almost any program opportunity as long as there is discipline on the part of the agency. “That discipline has to apply both to risk selection and rating methodology,” he says. “We’re not just following the market. As for appetite, we look for what I call ‘special’ specialty programs. For example, we don’t write hotels or motels because there are already too many program companies chasing that business. We look at specialty areas that are off the beaten path.”

The Great American executive says it is essential for program carriers to manage their portfolios. “A number of companies became involved in program business a few years ago and got hurt because they didn’t manage their business properly. We work very closely with our program administrators, collecting information and staying on top of things. The more sophisticated players in the business will benefit from the coming hard market. Companies that have managed their business well will remain players. Others will be licking their wounds,” he says.

While carrier interest in program business remains strong, David Springer, president of NIP Group, says that carriers are seeing fewer submissions today as opposed to a year ago. “Fewer programs are moving between carriers. Carriers are still interested in the program delivery model, and that’s good. But everybody is concerned about pricing. There are those who say the market is stabilizing, but we have not seen that yet.”

Springer says that there are some start-up programs that carriers are looking at. “But carriers have to monitor their established programs first, especially in terms of performance and rate adequacy. People aren’t shopping their programs as they did before. People want to maintain relationships because of the soft market and the troublesome stock market.”

Those interviewed stressed the importance of the Target Markets Program Administrators Association in the program administrator-carrier relationship. “There are other associations that have program administrators as members,” says Suter. “But the TMPAA is unique in that it specializes only in program administrators. Their meetings are an excellent opportunity to network and find new business.”

Says Molatto: “Target Markets is a perfect forum for meeting people who are specialists in the program business. We’re launching a new program soon that has come about because of our attendance at a Target Markets meeting.”