Years of intensifying storms and increasingly widespread wildfires have taken their toll on the property insurance market. Coverage for both personal and commercial risks is becoming harder to obtain and much more expensive, creating headaches for insurance agents and their customers.
Insurance exchange MarketScout reported that commercial property insurance rates climbed 8.6% in the first quarter of 2021. At the end of 2020, coverage on homes worth more than $1,000,000 brought similar increases. Depending on the location, the pain was even worse. A MarketScout spokesperson reported that homes in brushfire areas of California and hurricane-prone parts of Florida saw increases in the 20% to 30% range.
Laurie Salkin, a Florida agent with Marsh, says she’s seen renewals up 40%. “What do you even do with that?” she complained. Scott Johnson of Marindependent Insurance Services in Mill Valley, California, calls this “the hardest of markets” on the personal lines side.
In addition to premium increases, carriers are taking a variety of underwriting actions to limit their losses. Johnson says these include lowered limits, reduced geographical areas of coverage, lower capacity, reduced endorsement coverages, and non-renewals.”A significant amount of new business we are seeing is from consumers that are being non-renewed by their preferred insurer and their current agent just seems unable to handle it,” he said.
For agents, it’s time to get creative. On the commercial side, that may mean placing coverage with more than one insurer. “I am now finding it not that rare to have to use multiple insurers to provide the same amounts of coverage that used to be handled with just one provider,” Johnson says.
Knowledge is also power. Agents need to know their carriers’ general and specific underwriting appetites. Johnson advises asking many detailed questions during seminars they present. Will they consider a home within a mile of the ocean? What is their capacity for commercial property in certain California counties? Does it vary by occupancy, construction, and recent updates?
Underwriting appetites vary by carrier. After Superstorm Sandy in 2012, many carriers pulled back in areas such as New York’s Long Island. Appetites have grown and retracted, depending on events and reinsurance coverage and costs. Some carriers have been aggressive while others have tightened their guidelines.
Complete and thorough submissions increase the chances that an underwriter will accept an account. Several years’ loss information, links to prospective insureds’ websites, photos of homes, and explanations of anything unusual make the underwriter’s job easier.
Johnson said agents should go beyond the questions in an ACORD application when pre-qualifying risks. Some carriers ask questions that the applications don’t. “I have one non-admitted home insurer that wants to know the ‘mesh size’ of the metal ember mesh screen,” he says. “That is not a question on any ACORD form I have seen. Asking that specific question early on can increase acceptance.”
Belonging to an agency network or cluster can also help an agent find markets. Many employ specialists who work with member agents to place difficult accounts. “Having the right (managing general agency) or cluster behind you is more important now than ever,” Johnson says.
Lastly, since agents can’t change reality, they need to prepare their customers. Newsletter articles, social media posts, blog posts and podcasts can raise awareness so customers are less likely to be surprised by market conditions. Agencies that have a plan in place, anywhere from communicating the issues to their policyholders to marketing the more challenging risks will fare better than agencies that don’t. The increase in rates for the most part means more revenues to the agency and because of this, there is a greater margin to invest in marketing and staffing to prevent your agency from losing this business.