Veteran Insurance Pros Offer Strategies for Navigating a Hard Market

Everyone in the insurance industry knows that 2023 has become one of the hardest markets in decades, across the board.

In a panel discussion — No One Said it Would be Easy. Navigating the Current Hard Market — held recently by Insurance Journal’s Academy of Insurance, four industry veterans dissected the causes of this difficult market and offered advice on how to thrive in it.

“I just can’t remember a market like this,” said panelist Nancy Germond, executive director, risk management and education, for the Independent Insurance Agents & Brokers of America, or the Big I. “It’s the hardest market I’ve ever seen.”

Hard and soft markets used to be like locusts, said panelist Bill Wilson, founder of Insurance Commentary.com and author of Insurance Journal magazine’s monthly column, Is It Covered? “Every seven years, you would have this cycle.” But nothing like this, the panelists agreed.

Significant premium increases, reduced industry capacity to write coverage, cuts in coverage and more uninsured drivers are both evidence and causes of the current hard market. Homeowners insurance has been hit particularly hard, with premiums increasing many times over for areas at risk for catastrophic weather losses.

Carriers are looking for reasons to reject new business, said panelist Scott Margraves, insurance expert witness with Gulf Coast Risk Management. “There’s an attitude that carriers really don’t want to write new business, that they’re taking a significant increase in revenue and premium without additional exposure, so trying to get an underwriter or the supervisor interested in a piece of business is more of a challenge.”

Inflation is also contributing, especially in property where valuations are not keeping pace with the costs of repairs, said Patrick Wraight, director of the Academy of Insurance.

Also, because so much of the change is climate-driven, the panelists agreed that there may not be an end in sight and that there’s a good chance the hard market will become the new normal.

While higher deductibles and coverage reductions are causing issues, the bigger issue is that standard market carriers are far more selective, Margraves said. “If it doesn’t fit the box, we’re going to take a pass.”

To work around those issues, agents must go to the excess and surplus market to keep business, “and that’s the wild west,” he said. “Do your due diligence. It’s tough right now; it’s very tough because the E&S brokers are not releasing quotes either,” he said. “They know they’ve got you over a barrel.”

So, the key for insurers and agents is adapting to deliver what clients need under these new conditions.

Become an Advisor

“Now is the time that you build value,” Germond said. “You become a trusted advisor because everybody’s hurting, and if you can help explain to them exactly what’s going on and, you know, it’s not you, they’re not picking on you. This is endemic in our industry right now.”

She said it could be as simple as social media or emails offering proactive advice about maintenance or security. An agent will gain clients’ confidence if they can find ways to get ahead of issues for clients to lower or maintain premiums without losing coverage.

“Constantly be talking to your clients,” she said.

Start With the Supply Side

Carriers are looking for agents to write lines, Margraves said. “Find those online programs and figure out what they want to write.” It’s easier to cold-call a business and make a deal with a specific offering and benefit. “If you’ve got something to sell, people want to buy,” he said.

Develop Relationships

“Now is the time to develop hand-holding relationships with good wholesale brokers,” Germond said.

“Because, for example, if you’re going to write a specialty line of coverage … you want a wholesaler who knows their competition and knows the forms, so that they can be honest with you about here’s where … you’re not going to have coverage, whereas with another form, you might,” she said. “So, develop those relationships.”

When “working with wholesalers, hammer out beforehand who’s going to issue the certificates of coverage. Make sure you’ve got that because we’re finding agents saying — they won’t issue a certificate, I can’t issue the certificate, but we know that we have to service our client,” she added.

Focus on Coverage Over Premiums

“We tend to look at premiums when we’re in a hard market, but I can’t overstate the importance of looking at coverage,” Wilson said. When you place an account with a company, there are certain coverages that you will request because you know that the insured needs them, he said.

However, when the policy comes back in, when the deliverables come into the agency, an agent should make sure what they want is included, but just as importantly, see what was added that you didn’t ask for. “I will guarantee there are exclusionary or restrictive endorsements that the carrier has added, sometimes justifiably, but in many cases, you can get those removed for little or no additional premium. And in some cases, they can be catastrophic,” Wilson said.

Businesses may jump at a low premium without reading the fine print, and they will appreciate a vigilant agent who does not cut corners.

Wilson knows an agent who has made his living “plugging holes” for clients. “He says every week there’s a contractor [who] comes into his office wanting him to save them. Invariably, they leave paying more than their current premium because he showed them all the holes and their current policies and how he could plug those holes for little or no additional premium,” he said. “That kind of coverage-based selling, I think, is something that we also need to explore more.”

Find a Niche

“You can’t compete against the Walmarts of the world,” Margraves said. “I guarantee you there are people advertising and looking for business right now. … If you can find a market that wants to write cannabis shops and CBD shops, you ought to be writing business all day long.”

Germond said there are also opportunities in writing policies for people who have started businesses or have work-from-home side gigs.

Remarket Strategically

One result of the hard market is that many agents have to remarket more frequently, Germond said.

“You’ve got to have a strategy in mind for what you remarket and what you don’t,” she said. A recent survey showed that 50% to 75% of agents were remarketing accounts, which takes a lot of resources, Germond said. Multifamily housing and commercial properties are tough to place, she added. One of the few bright spots may be workers’ compensation. “If you have agents in your agency who can lead with workers’ comp, that can help,” she said. Leading with comp can help bring in other accounts.

Double Check Everything

It’s more important than ever to double check everything that comes across your desk, Germond said.

She said the insurance industry is experiencing a “brain drain,” and that new agents are more likely to make mistakes and omissions.

“Where you could have in the past relied on the standard lines carriers to get it right when they do a renewal or issue a new policy, you can’t rely on that anymore,” she said. “You’ve got to check everything.”

View the full discussion to learn more about the history of the current hard market, panelist predictions and advice for thriving in the new normal on the Insurance Journal Academy.

Topics Pricing Trends Market