Brokers are currently caught between a pandemic and a hard market, with several insurers predicting that Canada’s hard market cycle in property and casualty insurance will last at least one or two more years beyond the end of the pandemic. And so how are brokers going to draw blood from a stone and place coverage during such an extended hard market?
Early this year, Canadian Underwriter asked 234 brokers across the country for their opinion about some common strategies employed to deal with the hard market.
Hard markets are typically characterized by price increases, reduced coverage, and restricted or shrinking capacity. Brokers have reported it’s particularly tough to find liability coverage for companies in the following business lines: Directors’ and officers’ insurance (D&O), cyber, snow plow, trucking, hospitality, long-term care facilities, and commercial general liability (CGL).
Based on the survey results, three main business strategies have emerged over the past 12 months…
Changing the mix of insurer partners
One way to expand a client’s access to markets would be for a brokerage to change the mix of insurance carrier partners with which they do business. We asked broker producers (salespeople) and principals (brokerage owners) whether they felt such a strategy had been beneficial over the past two years.
The short answer is no.
Only 33% of producers rated changing carriers as a beneficial strategy. While that number is up from 29% earlier in the pandemic, the same tactic was considered more beneficial pre-COVID (35%).
Brokerage owners and principals were even less likely to see changing their carrier partners as beneficial (31% in 2021). That represented a drop from 36% last September, during the second wave of the pandemic. Thirty-four per cent of broker principals thought it was an effective strategy in 2019, before the pandemic.
Another way to expand your client’s access to markets is to increase the number of carriers to which you send your client’s submissions, or what insurers have dubbed the “spray-and-pray” approach. Basically, brokers send out as many insurance applications to underwriters as possible, hoping that at least one underwriter will agree to cover the risk.
Blanketing underwriters with insurance applications may be hindering brokers and their clients rather than helping them, as some insurers have observed.
“What I would encourage you [as brokers] to avoid in this market is broad-based, shot-gunning out [of] your submission activity on [behalf of] any individual customer,” Andrew Steen, president of Berkley Canada, advised brokers during the Insurance Institute of Ontario’s At the Forefront webinar entitled, Finding Your Success in Today’s Hard Commercial Market.
Steen cited the example of one submission his underwriting team received from a broker: It was copied out to 16 other property underwriters in the market.
“Now, you may think [as a broker], ‘Okay, this is awesome, I’m getting to all the players at once,’” Steen said. “But invert the situation for a minute and ask yourself: If you were an underwriter getting that email, how much attention would you want to dedicate to that, given that you have definitely sent it to people who [have no risk appetite for that kind of coverage]? The more targeted you can be with your submission activity, I think, the more rewarding that that will go for you.”
Insurers want brokers to take a more targeted approach. They don’t want to see submissions that clearly do not fall within the insurer’s appetite for that particular risk.
Advocating for underwriting creativity
On the flip side, brokers want underwriters to be more responsive to their queries.
“Response time is the biggest concern I have right now,” one broker commented in the 2021 National Broker Survey, in answer to a question about how carriers can make it easier for brokers to do business with them. “It would also be nice for [underwriters] to clearly communicate, whether in writing or on their website (preferably), what their market appetite is. With things changing as much as they have in this market, it is important to know who does what so we don’t blanket the markets and make everyone busier than they already are.”
Brokers also want underwriters to explore “the art of the possible” when assessing a client’s risk. “Be an underwriter, not a robot,” one broker commented in the survey. “Think outside the lines.”
Another broker urged underwriters to take a more granular view of the data when assessing a client’s risk. “Underwrite with intelligence and not just actuarial information,” the broker wrote in a survey response. “[Take a] regional approach to underwriting, specific to loss ratios for classes in my region, as opposed to globally or provincially.”
Some just want the hard market to end. “Loosen this hard market and be more flexible in accepting borderline risks that don’t fit the ‘optimal risk’ criteria,” one broker suggested.
Or, as another broker put it bluntly: “Get rid of the hard market.”