Articles

Renewing Your Property & Casualty Insurance:

The Scales Have Tipped

 By Joy M. Gänder, CPCU, ARM

In late 2001 through 2003, property and casualty insurance premiums were increasing and businesses tried to mitigate the potential adverse impact of these higher rates.  Back then, the insurance market was “hard” or a seller’s market.  Fast forward to 2007; the scales have now tipped back to a “soft” insurance market, a.k.a., a buyer’s market.  Happy days are here again, right?  Well, before jumping to conclusions, take a few minutes and consider what these lower prices might really mean.

Apples to Apples?

During a soft insurance market, many new insurance companies will appear willing and able to write your property and casualty insurance – usually for less money than what you currently pay.  Unfortunately, some of these companies have a minimal understanding of what it means to insure your industry, and the coverages they offer, or the lack thereof, confirm this.

In a bidding situation, it is ideal for insurance agents to have specifications on which underwriters base quotes.  These specs provide the same underwriting information to all parties, stipulate the minimum coverage requirements, and describe any services required throughout the year.  Absent the specifications, agents and underwriters will offer what they like, thereby making it difficult, if not impossible for you to compare proposals and make an informed buying decision.

What’s the solution?  No less than four months before your insurance renews, develop a bid specification document which includes:

• Updated underwriting information, such as projected sales and gallons, property values, a driver list with license numbers, and currently valued loss information, etc.;

• Minimum coverage requirements and limits (property amounts, liability limits, etc.); and

• Service requirements.

This effort is not the same as providing bidding agents a copy of your current insurance policies with the premiums deleted.  Avoid the headaches and hassles of attempting to understand coverage differences by requiring agents to meet pre-determined coverage bid specifications.  Put the responsibility of advising what they will and won’t offer in their lap. 

What Services?

If you receive a proposal which, from a coverage and premium standpoint, is more attractive than your current program, consider the services you might gain or lose by changing agents and/or insurance companies.  For example:

• Make a list of the services your current agent provides.  What does he/she do, when, how often, and does he/she take the initiative or only respond to your requests?

• What risk control services or programs does your present insurance company provide: i.e., slip and fall prevention, early return to work, and/or safe driving habits?  Have they been helpful? 

• Have the number and amount of your claims decreased following the introduction of the safety programs?

If you are unable to answer these questions, sit down with your current agent and discuss assigning a monetary value to the services.  Then use those details to assess the services available from the bidding agents and carriers.  The inability of bidding agents/carriers to provide the same services should be taken into consideration when making a buying decision.

Seasoned Carriers?

In some ways, selecting an insurance company is like hiring an employee.  All other things being equal, most employers want to hire the person with germane experience.  The same philosophy applies to your insurance company.  All other things being equal, most business owners prefer to buy insurance from a carrier who has experience with their particular industry.    

A soft insurance market brings out all kinds of carriers who are looking to get into new industries.  In deciding where to place your coverage, ask the agent how many other firms in your industry the carrier insures.  How long have they insured them?  While difficult to quantify, there is merit in assigning value to a carrier’s experience with your industry.

Lower Premiums?

You may receive a proposal whose price is 15 to 30 percent less than your current premium.  This does not necessarily mean you’ve been paying too much.  It is typical for industry new-comers to offer lower prices – done in order to increase market share; or they may not understand how much premium is needed for potential losses.  In any event, do not presume a markedly lower price this year will mean the same for next year.  Express any “what about next year?” premium concerns you might have to the agent and underwriter.  What kind of response do they offer?  Is it reasonable?

Summary

Reviewing property and casualty insurance proposals can be a mind-numbing experience, and the inclination to accept a proposal based on an attractive price (read: lower) is understandable.  However, before switching:

• Make sure the coverages are equal to or better than what you currently have;

• Analyze the services available from the agent and the insurance company, and assign a monetary value to them; and

• Consider the carrier’s experience with your business or industry type.

Using a bid specification document will go a long way toward helping you make an informed decision.  If you need help developing a bid specification document, or interpreting the proposals you receive, call Joy Gänder at Gänder Consulting Group, 608-286-0286 for assistance.  You can also e-mail your questions to her at gander@ganderconsulting.com.