As insurance rates continue hardening across almost all lines, insurance agencies and their producers are the bearers of the bad news.
Inflation has kicked into high gear for the insurance industry, in the wake of parts shortages, increasingly larger and costlier natural disasters, massive jury verdicts and reinsurance costs. All of those factors are increasing claims costs, forcing insurers to raise rates, retrench and pull out of some markets altogether.
When markets harden, producers have to hustle harder than usual, and after scrambling to get quotes have to tell their clients their premiums are increasing, sometimes significantly. One of the most common reactions for a client during times like this is to call another agency to get a quote, or perhaps they go online and do some shopping on their own.
Often, however, they quickly learn that their producer had actually presented quotes that are the same or better, and may stay with you. But most agencies would prefer that it doesn’t come to that.
During a rising insurance rate environment, there are steps agencies can take to reduce the impact.
Grow your markets – It can hurt if one of your go-to insurers has suddenly grown cold on writing new business or is raising rates significantly on existing accounts. You may also have an agreement with the insurer for a bonus commission if you write a certain level of premium with them.
As more carriers pull out or restrict writing of certain lines or geographic areas, you will have to work extra hard to expand your markets and find insurers that are open to new business. One way to do that is by forging relationships with wholesale brokers, particularly ones that specialize in classes on which your agency is focused.
Some of these markets may have higher premiums than your other go-to carriers, but for some accounts they could be the only one willing to write their business. And sometimes, that’s what it comes down to, either because the account had a few costly claims or they operate in an area susceptible to a natural catastrophe.
Keep your clients in the loop – Clients are a brokerage’s lifeblood and instead of them thinking of your agency as a vendor, you need to establish your agency as a partner.
You can do this by staying in touch and keeping them informed of what’s happening in the industry and how it affects their premiums. Your clients will already know that prices have been increasing and, logically, inflation will trickle into their insurance premiums as well.
You can brace your clients for rate hikes by sending them meaningful communications during the year through informative e-mails or newsletters or other forms of communication. Or if you come across an interesting article that you think they should know about, you can send your clients a link.
You can also take the opportunity to advise them on developing their risk management and workplace safety, and lately, hardening their properties against natural disasters. Helping them reduce their claims can help them keep rates in check.
Provide coverage choices – If a client will struggle with a higher premium, you can provide them with a few options that can reduce what they pay for coverage. This is a last-ditch solution since it will often mean them having to pay more out of pocket if they have to file a claim.
One option is to increase the deductible. This will often have a material effect on premiums, but requires the policyholder to carry more of the risk by paying more out of pocket for any claims. Some clients may propose reducing policy limits to cut their premium, but that has to be approached carefully.
For larger accounts, agencies can propose loss-sensitive rating plans like large deductible or retrospective rating plans, which are well suited for workers’ comp coverage.
Insurance brokerages can also work with their clients to beef up their risk management efforts, which can reduce claims during the year. While they may still pay out a higher premium at the beginning of the policy year, if they can keep claims low, they may benefit in subsequent years.
Finally, if they have unused assets, like additional vehicles that aren’t being used or vacant buildings, they can reduce their insurance by selling off those assets. Taking a commercial vehicle off the books can have a significant impact on rates.
Don’t stop prospecting – Hard markets make for tough sales condition, but the goal of any agency should be to continue growing. And that means continuously prospecting for new clients. Your competition has likely not stopped, and your clients will continue receiving calls from competing agencies.
Keep calling and prospecting and you may be able to tap into accounts whose brokers are not doing enough to find them good rates, and perhaps you have access to markets that are favorable to those prospects. You can stand out by providing them with quotes from numerous insurers to prove your mettle and hustle.
During a hard market, insurance buyers will appreciate an agent who goes the extra mile for them to help them keep their premiums in check.