The Hard Market Renewal Blues

Have you just received the news that your insurance renewals are going up 10 percent or more?  Has your broker indicated that “it’s a hard market out there and everyone is getting an increase”?  Or, are you facing a restriction in coverage on an upcoming renewal?

Well the simple fact is that the insurance marketplace does run in cycles from “soft pricing to hard pricing”, and right now we’re in the third quarter of firmer pricing.  The latest barometer of pricing from MarketScout (a leading insurance industry resource) indicates that for the fourth month in a row average renewals are seeing a 5% increase or more.  Certain classes of business and certain lines of business and localities will see more or less of an increase.

In the New York metro market 5% may very well be the average increase, but property heavy accounts are seeing increases more in the ballpark of 10% or more.  Construction accounts in the NYC boros are also seeing heavier increases as fewer insurers are competing for that type of business.  Professional and management lines of business like D&O Insurance also are firming higher than the averages.

So, what does a business owner do?

If you could turn the clock back a year or so I would recommend a thorough analysis of your program to determine if coverage and retention points were accurate, and to determine if your loss history was accurately depicted.  I would also recommend strengthening your risk management strategy to head off potential claims and minimize the costs of claims.  By illustrating a solid game plan of reducing risk within organization puts you much better negotiating position than your peers who do not have a game plan.

Since we cannot turn the clock back, my recommendation would be to be more strategic about an upcoming renewal.  That doesn’t mean shot gunning the marketplace looking for quotes and sending 3 or 4 brokers scurrying around shopping your account.  That strategy may adversely affect your chances of reducing costs!  What does “being more strategic” mean?  It means looking at your strengths and your weaknesses when it comes to risk.  What have you done and what are you doing to reduce risk and mitigate claim costs in your organization?  Just because you may not have had claims in the past year does not indicate a strategy – it may indicate that you’re lucky.  To achieve superior pricing results when the market is hardening you must be able to tell your story of HOW you’ve reduced risk and WHY your company deserves the best pricing the market has to offer.  If you can’t do the HOW and WHY storytelling, your renewal will be priced like all of your competitors.  Need help with the HOW and WHY?  That’s what we do – give me a call.

The other part about being strategic is that your insurance company underwriter is likely the biggest influencer over your renewal pricing.  Unfortunately, the underwriter often shielded from meeting you by your broker.  I’m not sure why this happens, but brokers often do not want their clients meeting the person who makes the pricing decisions on their account.

My feeling is, if you’ve got a good story to tell then why not ask to meet your underwriter?  Call your broker up at least 4 months in advance of your renewal and say you’d like to set up a meeting with the underwriter who is responsible for handling your account.  In advance of that meeting you’ll want to of course prepare – make sure your facility is in tip top shape, housekeeping is excellent, and all safety issues are properly addressed.  Work with your broker to develop your pitch for that meeting.  Be frank about why you’re meeting: The purpose of this meeting is to demonstrate why you think you deserve the best pricing track the underwriter can get you!  Ask for feedback during the meeting and at the end of it, establish a time frame for deliverables.  Specifically you want to know when they will complete their renewal pricing and when your proposal will be delivered.  Insist on it being in a reasonable time frame – no less than 60 days prior to renewal.

This meeting should give you immediate feedback on where your renewal will likely be landing – if there are problems or issues, you want to know about that early, so ask if there are any underlying concerns of the underwriter.  Are they under any particular orders to raises prices across the board for all accounts?  Do they have flexibility or not?  If you’re getting negative feedback then it may mean bringing in competition – but in a managed approach.

Bottom line: the insurance renewal process is driven by your broker and by your underwriter.  Sitting in the passenger seat a week before the renewal date does you no good.  To learn how to gain a competitive advantage give me a call in New York for more conversation – put my 30+ years of experience to work for you and your organization!

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