BOP Market Expands Profits and Proves Itself ‘Internet Friendly’

The Business Owners Policy (BOP) has been around for at least a couple of decades now. BOPs are traditionally associated with small businesses seeking basic liability and property coverages. But over the course of the years, much has changed in the BOP market—for the better.

First of all, especially during the last few years, sales of BOP products have taken off.

“We’re writing more BOPs than we ever have,” said Tim Hampton, a partner at retail agency Aspen Insurance Brokers in San Diego. “Originally when the BOPs came out, they were really designed for the small business, and their application, as far as classification of risk, was very limited. Now that classification of risk has really gotten very broad, many, many more businesses now qualify for the BOP. More and more companies are going toward the BOP mode of writing insurance because it’s packaged, it’s competitive and it’s got some great, great coverages.” He added that most of the main BOP writers are allowing the agency to write businesses with increased sales.

In fact, the whole creation of the BOP concept and its subsequent evolution has been a study in the need for efficiency—in writing, issuing and pricing a product.

“Previous to the BOP, you had to write a package policy,” Hampton said. “The application took a lot longer. Then you usually had to send it in for rating and depending on the company, that could take a week [or] take a month.”

The BOP, on the other hand, has proven to be a product especially amenable to the Internet process. BOPs can now be rated with company software or over the Internet, and the application process is much simpler.

“It’s rated, you write it and pick up the check,” Hampton said. “You put the application on the computer and it is electronically transmitted to the company…You’ve got of a lot of efficiencies there that you don’t have with the old standard package policy.”

As online insurance sales have evolved, some distinctions between personal and commercial lines have arisen. In personal lines, especially auto and homeowners, it’s not difficult to find numerous insurance technology providers offering comparative rating systems.

However, on the commercial side, what has developed is that almost all insurance companies have their own proprietary rates and systems for their particular programs. If an agency represents three carriers from a small business perspective, it will have to go into three different systems, one by one, to pull up the different rates, make comparisons and then make an offer to the insured seeking a BOP product.

This may sound much more time-consuming for the agent, but according to Ron Gorman, president of the western region for Zurich Small Business, the whole strategic approach for his company is ease of business. “We have found that CSRs in an agency typically have control of this type of business,” he said. “They can determine what market they’re going to place it with. If you can make it easy for them, they love you.”

“But then again, when you talk with some of the smaller regionals, they’re still based on a paper application, where you submit it into the company and they do their data entry and do the rating,” Gorman continued. “There are lots of different variations out there.”

Comparative raters for BOPs, such as BopFSC, have existed for some years. Bob Meyerson, president of Fiserv FSC, explained some factors that can serve to mitigate an agency’s perceived need for a comparative BOP rater.

“A lot of agencies, when a BOP is presented to them, know by the nature of the BOP exactly which company it’s going to go with,” Meyerson said. “Certain companies will specialize in just restaurants, some will specialize in small shopping malls.”

Nevertheless, Meyerson said his firm has also evaluated the fact that there are a number of insurance companies that do overlap quite a bit. Or the agents don’t want to spend the time or don’t have the necessary enhanced resources to investigate on a company-by-company basis. “So they use our system to investigate what a particular company will write for,” he said.

Meyerson also admitted that some agents may simply not want to pay for the comparative BOP rater. But he pointed out that in addition to the time an agent saves by not having to go to multiple sites, if the agent is able to write at least one or two risks with the assistance of the rater, that in itself will cover the monthly fee for the system.

The nation’s first comparative BOP rating product was released by AMS Rating Services in 1993. According to Amy Batson, vice president of marketing for TowerStreet, a business unit of AMS Holding Group, the comparative BOP rating is “a very difficult thing to do—more difficult than programming a personal lines rater.

“It’s very difficult to do an apples-to-apples comparison,” she continued. “We had to go through a lengthy exercise of identifying what this company called ‘A’ and this company called ‘B’ and then creating a standard name for that…Then there’s also the issue of how much market is out there for an automated BOP rater. [In other words] there are some company systems and sites that agents go to—can they get what they need out of a comparative system vs. the company proprietary system?”

Batson also noted that with a large commercial package, there is a lot more flexibility in the price compared to the BOP. “Why would you want a comparative package rater if you’re just going to renegotiate the price with the underwriter anyway?” she said. “BOPs are a little more set…a little simpler. And there are such differences in the premium that carriers offer in BOP that until comparative raters came out, agents sometimes didn’t realize. They had to really be in tune with what their different companies were doing and where to place the business to know that.”

Batson also commented on an extension recently made to the TowerStreet (Rating Services) BOP rater. “QuoteNetworks is our service that allows an agent to put the rating functionality on their website,” she explained. “An agent that has a BOP product and goes through the QuoteNetworks option can put the comparative BOP rating up on their website so the small businesses in the area, their customers, can go in and actually do some comparative shopping of their businessowners rates.”

In any event, these days the whole BOP process is definitely leaning more toward online submission and online quoting.

“For example, we represent Allied Group Insurance,” Hampton said. “We go on the Internet, and we know how to get into their rating and issuing software…We enter our agency code, and we’re allowed to rate the product online. We get the quote—give it to the insured. If they like it, we go back in, pull that quote, enter the rest of the information and ask for an issue. Then if you want to do it, for example, from the Hartford, you go in, pull up their software and go through their process.”

Gorman explained that the approach of Zurich Small Business is to have a portfolio product, which includes four lines of business: property, liability, automobile and umbrella.

“Other companies, particularly the smaller regional companies, typically would not include the auto with it,” Gorman said. “It would just be your property and your liability and maybe your umbrella, but a lot of times that’s separate, too. We do a portfolio product where we package everything together in the BOP and include it all in one policy.”

As with any type of insurance, exposures will drive what is included and what’s not included. “But if you went to pretty much any town U.S. and walked down Main Street, probably about 90 to 95 percent of the storefronts that you saw would be eligible for it.”

Gorman concurred that the range of what is included in the BOP-type program and eligibility criteria have expanded greatly during the past decade or so. He emphasized, however, that it is the efficiencies of Zurich Small Business’ Internet process that have differentiated the company from its competition. “We have endorsement processing up and on the Internet, so an agent can actually go in, and it’s full agency self-service,” he said.

The bottom line: the BOP lacks many of the complexities of some of the larger commercial packages, and lends itself well to the efficiencies of the Internet. Carriers have taken note in terms of marketing approach. But with a number of other tech providers out there with BOP comparative raters on the market or in the works, there could be an increasing shift toward the use of such systems for BOP products in the coming years.

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