November 17, 2020 by Adam Malik
Insurers are becoming more meticulous around what they deem to be a good risk and that extra scrutiny is giving brokers heavier workloads, broker leaders say, and it could force brokers to limit how much they take on.
Interest rates are near-zero with no relief in sight. With the reduction in investment income, insurers are putting greater focus on underwriting profitability. “But the larger impact is built on managing the appetite and how insurers are pricing your products right now,” said Kent Rowe, president of the Insurance Brokers Association of Canada.
“And whether it’s an affordability or an availability issue, brokers are tasked with using what we have in the marketplace to still help provide really strong solutions to our clients in the face of all this.”
Because capacity has tightened and underwriters are exercising more care, satisfying clients has become harder.
“The higher scrutiny on underwriting profit, versus what [insurers] can make up on the investment income, in turn creates more work for us as brokers to address that with our clients, and also go back to them with more of those questions and explain the difference in terms,” explained Sarah Thompson, chief marketing officer at Hub International.
Sometimes, renewals are coming in right up against the renewal date, said Andrew Agencies chief operating officer Clint Smith in Virden, Man. “In those cases, it is really tough for us to have a thorough review with the customer prior to renewal.”
That means things need to be streamlined better, he told Canadian Underwriter. “There is a lot that is going into underwriting and there is a lot going into assessment of risks, assessment of clients and assessment of segments. I think we are going to find that certain brokers are probably going to start to limit what that they are capable of doing.”
Furthermore, some insurers were caught off guard when they realized their exposures due to COVID-19. That has led to greater scrutiny of their own wordings and that of other insurers with which they’re willing to follow.
“And so things are taking longer, and that’s why we’re seeing delays in getting renewal terms out. And it’s just been stressing the system on all sides,” Thompson told Canadian Underwriter. “So whether it’s our marketers, the underwriters at the insurance companies, and then the trickle-down effect to the sales team and our clients it’s definitely a lot of additional communication and back and forth between all parties.”
Some have even decided to outright leave the market, which exacerbates the issues.
“Obviously, that, in turn, results in brokers having to remarket that business,” Thompson said. “It’s looking at an existing piece of businesses as if it’s new, building out submissions, sending them to multiple carriers. And that’s ongoing. In the past, when we might have renewed something with an incumbent carrier, now we’re finding reductions in capacity means we’re having to touch every file to fill out the remaining capacity.”
That leaves brokers working harder to find solutions and get creative to find ways to manage client costs.
“Teams are so vested in delivering solutions for clients that they’re really struggling with some of the barriers that are being put up in this market,” said Carol Mills, chief sales officer at Hub International.
Brokers are doing whatever they can to explain to clients why things are the way they are, while advocating on their behalf to insurers, she noted.
“It’s certainly putting increased pressure on everyone and challenging them in ways that they haven’t been through before. They’re working to come up with creative solutions for clients but aren’t always able to deliver a favourable outcome,” Mills said.
She advised brokers to continue to get ahead of the issues and have conversations with clients so that they’re aware of the challenges.
“It’s incredibly important that we are all proactive with this and so that our clients are ready for what’s in front of them tomorrow,” Mills said.
Feature image by iStock.com/siraanamwong
Brokers are caught in a tough position right now, but open communication and proactive reviewing of client accounts is the only way forward to navigate this situation.