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Increasing Insurance Premiums Affect Retention, Here Is What You Can Do

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Insurance rates are rising and this is a huge opportunity for revenue growth if an agency plays their cards right. On the flip side an agency can lose revenues due attrition if they don’t.  MarketScout reports that commercial property-casualty rates increased 6.25% in the third quarter of 2020, while personal lines rates climbed by 5%. Directors and Officers Liability rates jumped 11.5%, Excess Liability rates increased 8.5%, and commercial property rates were up 7%.

This period of increasing rates marks the end of what insurance agency consultant Chris Burand calls “the longest soft market in history.” Because so many insurance professionals have retired or been downsized since the last hard market ended in the mid-2000s, Burand says, “We’ve lost all the institutional knowledge about how to handle it.”

This makes the current market especially challenging for independent insurance agencies. How can they retain accounts during a time of increasing prices?

Stay in front of your clients and touch them regularly, says Nils Wright of consulting firm Risk Media Solutions, publisher of Insurance Newsletters.  “One regular topic of conversation among brokers is how they can touch their clients regularly, and this is more important now than ever before since you can’t meet them face to face,” he says. “Sending them newsletters with high-quality content that they can use is one way to do that.”

He advises brokers to send newsletters, e-mails or even text messages with important announcements about new laws, regulations or trends that may affect them. This way you stay in front of them during the year and you can use this as a value-added service. “You also won’t be a stranger during renewals,” he said.

“More than anything, (agents) need to be proactive upfront,” Burand says. “No touch renewals are a disaster waiting to happen.” Agents should seek out alternative markets early. Merely sending in applications to those markets isn’t enough, though. Wright stressed the importance of making quality submissions. When underwriters are inundated, they will tend to give priority to well-prepared submissions.

This is a period of learning and adjustment for agencies precisely because so many of their employees have never experienced a hard market. “Training is actually required for a lot of people because they haven’t been through this before,” Burand says. He notes that many agencies’ procedures are not designed for a hard market. “They’ve never had to work so far in advance before,” he says. “There’s a lot of learning going on at the last second here.”

No customer in any industry enjoys being told they have to pay more. Client reactions may range from annoyance to fury. Wright counsels agency employees to stay calm when faced with outraged clients. “Explain that it’s not just them.” Giving angry clients a cooling off period can help. “Some agents will promise to shop and give clients time to cool down.” Burand says a prepared agent won’t let it come to that. “If the first communication on a 15% rate increase is the insured calling mad, the agent has screwed up."

There are some things agents can do outside of rates to retain accounts. Burand suggests monitoring auditable exposures. The economic recession following the pandemic-induced shutdowns have reduced payrolls and sales. In some cases, reduced exposures can offset the impact of higher rates.

 

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