October 4, 2019 by Jeff Buckstein, Freelance Writer
Personal line brokers must work even harder in today’s challenging market just to hold on to their current client base.
“Of course, we always want new business,” says Linda Dolan, owner of Alport Insurance Agencies Inc., a small agency with nine employees, in Port Alberni, B.C. “But what happens in a hard market is, because we’re spending so much time re-marketing for our existing customers, it gets difficult to have time to find that new business.”
In a hard market cycle, it is important, first and foremost, to retain existing clients, emphasizes Dolan, who is also a vice-president with the Insurance Brokers Association of Canada (IBAC) and a past president of the Insurance Brokers Association of British Columbia.
Generally speaking, in a hard market, insurers will reduce capacity in business lines where claims costs are high. Consumer choice is similarly reduced, because insurers are less willing to take on new risks, thus driving up prices, explains Vicki Livingstone, owner and general manager of Freeman Insurance Agencies Ltd. in Innisfail, Alta.
“A number of factors are contributing to the hardening of the market in personal lines, particularly on the auto side,” says Livingstone, president of the Insurance Brokers Association of Alberta. Because insurers are using capacity earmarked for personal property lines to “offset some of the losses in auto, it is creating a bit of a hardening market on the home side as well,” she elaborates.
Customers seeking insurance are typically always price conscious, regardless of market conditions. But they are more likely to shop around to try and secure a better deal with a competitor in difficult times.
“It’s one thing to have your policy go up by three or four percentage points, or by $50 or $100,” says Gina McFetridge, president of Archway Insurance Inc. in Halifax. “But when your premium suddenly jumps $500 — or it’s up 100% or 200% over the previous year and you’ve had no claims — you absolutely become price-sensitive.”
That leads to a lot of customers looking for greener pastures. “The volume of clients who are calling and asking, ‘Is there another option? Can you look for me?’ is very, very high,” reports McFetridge, chair of the Insurance Brokers Association of Nova Scotia (IBANS), and a director with the IBAC. “So we’ve had to switch out the roles a little bit within our brokerage to be able to keep up with the demand.”
To maximize their chances of retaining clients, Archway is trying to provide them with the best deal for their policy. Some of the firm’s nearly 200 employees work exclusively at re-marketing. Part of that process involves re-examining personal policies for potential savings such as home or auto discounts they may have failed to take advantage of in the past. Another option is to ask policyholders what steps they have taken to reduce their risk of a loss. If, for example, a client has replaced a leaky roof or removed a wood stove, that might help reduce home premiums.
“We’re being a lot more proactive and working a lot harder to try to make sure that no stone is unturned with our current provider,” McFetridge says.
Livingstone says Freeman Insurance is trying to maximize discounts by combining home and auto insurance policies for clients wherever possible. Furthermore, if clients are able to provide a credit consent, they might be eligible to receive credit discounts.
“You have to let them know that you’re working on their behalf,” says Livingstone.
The flip side of clients leaving brokerages to seek a better deal elsewhere is to show loyalty to brokers who provide outstanding advice. Therein lies opportunity for brokers during a hard market.
“A hard market gives the broker the chance to really advocate on behalf of that customer,” stresses Chris Floyd, immediate past president of IBAC, and also president of Waterloo Ont.-based OTIP/RAEO Insurance Brokers Inc., a provider of home and auto insurance to the education community. “If a market is taking action that isn’t in that consumer’s best interests, we have that opportunity to really work for that customer to help them out.”
For example, in response to insurers having implemented more stringent underwriting rules, leading to the removal of Section C [physical damage or collision] coverage, brokers have used their access to multiple markets to serve those consumers better, Floyd says. “Another example is insurers mailing applications to consumers directly and requiring them to be completed prior to renewal. In most instances, a consumer needs assistance with that, so the broker is there to help.”
Brokers are always seeking ways to differentiate themselves and to add value, products and services — including technology designed to improve efficiency. But innovation is influenced by the regulatory environment, and not necessarily driven by a hard market, say experts.
“It’s challenging,” Floyd elaborates. “We’re all struggling as an industry to look for ways to add more and more value to our customers, because the products are so defined and, especially on the automobile side, so regulated.”
Client education imperative
For many brokers, a key strategy to retain clients during a hard market is transparency. This means educating clients about the underlying conditions and drivers within the industry that ultimately have an adverse effect on consumers’ pocketbooks.
Floyd notes that OTIP/RAEO has developed some information tools, along with op-eds, to help educate clients about the underlying market conditions.
“I see more of an uptake with brokers letting their clients know what’s happening,” Livingstone says. “That seems to be a big topic of discussion.”
It is a sensitive task. Brokers in Nova Scotia have been provided with specific training by IBANS to help deal with these tough conversations, says McFetridge.
“If you explain to people why this is happening — that we’ve got all these events happening in the world and insurers are cutting back on markets — then most people will get it,” says Dolan.
But those conversations can also yield widely varying results.
People may understand that there have been many floods resulting in water damage claims, and that wildfires have destroyed homes across Canada; and that these events, in turn, have contributed to escalating premiums. But insurance pricing is also driven by global claims events, and clients may not understand how an international event such as an earthquake in Chile can also affect their premiums, says Dolan.
For other clients, the decision comes down to a very simple calculation: bottom line affordability, which can cut two ways for brokers.
“We’ve had people coming in here, people for whom we’ve been able to place business, who were paying more through some other broker,” says Dolan. “So maybe that is a little bit of an advantage in a hard market — people are definitely looking around.”
On the other hand, the fact that people are looking means it will be more difficult for brokers to convince the price-shoppers to stick around. In some instances, that might mean bulking up on available staff.
McFetridge says her company has sufficient staff to devote to doing the extra work needed to retain existing clients. In addition, she has staff working in a sales role whose focus is “taking advantage of opportunities, as more and more people are shopping or displaced by their current company.”
Brokers stress the need for strong communications and nurturing relationships with both clients and insurers at all times, particularly in a hard market.
“Before the consumer gets the renewal in the mail, and their jaw hits the floor, and they start clicking online to find a cheaper price, we want to make sure we call first to say, ‘We understand the premium is up, here’s what we’re going to do,’” says McFetridge. “So they know…we’re doing everything we can to try to work with them to control the cost, within the constraints of where the market is now.”
“My best advice is to stay even closer to your customer than you would in what you might call a ‘normal’ time,” says Floyd. “Be communicative. Listen to what the consumers are saying. The [dialogue with] consumers helps mould the feedback that we give to insurance companies and to regulators when we’re lobbying to those parties.”