Insurance premiums are rising. MarketScout’s market barometers showed commercial insurance premiums rising at a 5.28% clip in the third quarter of 2022, with personal lines premiums not far behind at 4.58%. Insurers are being squeezed by high inflation, rising reinsurance costs, ever-increasing jury verdicts, shrinking investment returns, and supply chain bottlenecks.
All this means that agents are left delivering a lot of bad news to a lot of clients. Clients who receive bad news are unhappy, and unhappy clients go looking for new agents. In a time of rising insurance premiums, what can agents do to keep clients from looking elsewhere?
Educate your clients. Explaining how economic forces are impacting premiums may help put the situation in a context they can understand. Most people know that medical costs only go up, repair materials are harder to find, and storms are growing more destructive. If they understand how this affects premiums, they may be less likely to blame you.
These conversations should not wait until renewal time. Check in with them halfway through the policy term. This allows you to inform them of changing market conditions. It also helps you uncover new coverage needs or changes that affect their current coverages. If you are agency has a newsletter, which all agencies should, this is where you bring things like this up.
At the very least, a pre-renewal conversation is essential. This should be a few months before renewal for commercial accounts, later for personal.
Strengthen client relationships. Regular communications that do not include an invoice can help clients think of you as a business partner and not a salesperson. This could be anything from greeting cards on birthdays to news articles about topics you know interest them to information on how to prevent losses. Remind them that insurance claim payments cannot eliminate many negative consequences of a loss, such as physical pain, inconvenience, paperwork and reduced employee morale.
Expand your markets. Some of your in-house markets may become more restrictive, especially if they receive large reinsurance premium hikes. Prepare to look elsewhere to help your clients. Now is the time to form solid relationships with some wholesale brokers. Look for brokerages that focus on the classes of business that you specialize in. Not every alternative market will be price-competitive, but they may offer necessary coverages that your clients cannot get elsewhere. The more options you can offer, the better.
Offer coverage options. There are ways to alter the insurance program to soften the blow of increased premiums. This should be part of the pre-renewal discussion. Maybe they can absorb higher deductibles or remove physical damage coverage from older vehicles. While reducing insurance limits is generally not advisable, a reduced limit might make a certain optional coverage more affordable. Very large commercial accounts may want to consider loss-sensitive rating plans, such as large deductible or retrospective rating plans, particularly for Workers’ Compensation insurance.
There may also be loss exposures that the clients can treat with methods other than insurance. Risk avoidance, reduction, transfer, and other risk management methods should be examined. The final decisions on which risk management techniques to apply to specific exposures must be the client’s. You can explain how much premium can be saved by selling a building, but the decision to sell it is theirs.
Continue to grow your prospect pipeline. It may feel like a difficult time to write new business, but this is no time to let your pipeline run dry. Some prospects have agents who are not being proactive about market conditions; they may welcome a professional agency who will work to reduce their total cost of risk and not just their insurance premiums. Also, periods of rising premiums never last forever. The market will turn eventually, and agencies with overflowing prospect pipelines will be well-positioned when it does.
Informing a client that their insurance premiums are going up is never an easy conversation. In all likelihood, you will lose some business. However, with a strategic approach of marketing, client education and conversations, and prospecting, your agency can grow and even thrive during the difficult times.