Tag Archives: expenses

What to Expect on Management Liability

Gradually, over the last four-plus years, several management liability insurance (MLI) carriers have shifted their underwriting appetite and guidelines nationally, most dramatically in California. These changes have included some combination of:

·         Increased rates
·         Increased retentions
·         Reductions in coverage
·         Reductions in total limits offered
·         Reductions or removal of wage and hour defense cost sub-limits
·         Non-renewal of insureds based on industry, asset size, financial condition or loss experience.

This is quite a change, as for the previous 10-plus years there has been a surplus of capacity and MLI carriers were eager to write accounts at very attractive rates and terms. While there are still numerous MLI carriers with significant capacity, including some new entrants, the marketplace appears to be reaching a point where this capacity will no longer be use to offer the terms and pricing that we had been accustomed to seeing. This raises the question, “Why?”

Based on our conversations with MLI carriers in this niche, here are a few of the reasons:

·         Poor economic conditions five to seven years, ago leading to a significant spike in the frequency of employment practices liability (EPL) and directors and officers (D&O) related claims

·         Dramatically rising EPL claims expenses (even if a claim is without merit — remember, these policies cover defense costs)

·         Significant and continual increase in the filing of wage and hour claims (wage and hour suits are up 4.7% in the last year and 437% in the last decade)

·         Uptick in D&O claims involving bankruptcy-related allegations, breach of contract, intellectual property, federal agency investigations and judgments, family claims  and restraint of trade

·         The duty-to-defend nature of the policies, forcing carriers to provide a wide expanse of defense coverage for what might be arguably uncovered claims or insureds

What can our current (and new) non-profit and privately held management liability insureds expect as a result of the changes in the marketplace?

Our recommendation is to set expectations as follows:

·         There will be increases in retentions and premiums.

·         Smaller clients will need to absorb bigger percentage increases in premium and retention (as well as possible reductions in coverages), although in many situations the incumbent carrier will still be the best option if the increases are not outrageous.

·         A reasonable degree of competition and capacity will still be available for the larger management liability client. This may help mitigate increases in premium and retention.

·         Increases will be felt by insureds located in major cities (carriers generally still like risks in smaller cities and outside of states such as California, Florida, Illinois, New York and New Jersey).

·         Coverage for the defense of wage and hour claims will be more difficult to obtain and, when available, likely more expensive to purchase and with possibly lower limits or higher retentions.

·         Non-renewals by some carriers, based primarily on class of business or location. Some of these classes of business include:

o    Real estate

o    Healthcare

o    Restaurant/retail

o    Social media

o    Pharmaceuticals

o    Tech/start-ups

·         Carriers are asking for much more underwriting information than they have previously, especially if the insured has challenging financials, the insured is seeking additional funding or the insured has a challenging loss history.

Since 2010, Socius has been advising our clients that the MLI market appeared to be trending toward a hardening, following on the heels of numerous years of softness. As we get deeper into 2015, we continue to believe that this is the case.  The gradual transition that we initially described has, in fact, taken firm hold. We hesitate to pronounce the market as officially “hard” only because we hear rumblings that suggest that market conditions could very well deteriorate further, making what we consider hard today even harder.

For the moment, the watchword to agents and brokers is: “Manage expectations!  Difficult news is coming, so let clients know early – and often.”

6 Excuses Why Your Agency Didn’t Grow

It’s a brand new year. I hope last year’s numbers were where you wanted them to be: solid growth, increased revenue and expenses under control.

But for those agencies that didn’t add to their book, there’s always an excuse or six. It’s easy to rationalize why things didn’t go your way. Of course, sometimes, it really isn’t your fault; maybe you lost a major account for reasons beyond your control.

This column highlights a half-dozen common excuses and suggests ways to slap them down.

No time to sell. No producer ever has enough time to sell; yet it’s their most valuable commodity. There are innumerable ways to gain more selling time, including: wiser time management; more selective prospecting and quoting; using instant digital communications; shifting small, no-growth accounts to a skilled in-house agent or a less busy outside producer. Enact these approaches, and others, to extend the clock in your favor.

Not enough commercial prospects. Be preemptive. Work mainly with new business leads that align with your personal interests, plus pricing and underwriting strengths. Count the approximate number of prospects within each niche you want to target, and broadly pre-qualify them, before doing any actual solicitation. If you don’t, your sales results may not be adequate to offset your time and marketing expenses.

Our personal lines rates are too high. Competing head-to-head with direct marketing carriers isn’t entirely about price. Professional advice, a local presence, smart proposals, regular communications/reviews, plus a competitive premium, all generate appealing value. Besides, rates are fluid; they go up and down, relative to the competition. Focus on the elements that are within your agency’s control instead of lamenting about what is not.

No one has heard of our companies. If you tout your leading carrier as your agency’s brand, you are making your job harder than necessary. You are not your carrier. Besides, agency carriers never advertise as much as direct and captive-agent companies. Instead, concentrate on building your own brand through social media and traditional means. Adequately market and sell your agency, and people will buy from you — not the underwriting carrier.

Inadequate sales training. You can’t expect serious sales from unskilled salespeople. So, provide continuous sales training to every producer and front office staffer. To help, there are state association-sponsored programs such as the American Insurance Marketing and Sales (AIMS) Society’s CPIA designation for producers, plus a variety of sales training sources for in-house client reps. There are also independent vendors with worthwhile training tools (including my own Agency Ideas resources).

Too many rivals. Endless rivals, on all levels, challenge today’s independent agencies. Retailers, banks, captive and direct marketers, traditional competitors and more are all shooting for your business. Plus, the digital universe reduces the barriers of entry to anyone with an insurance license, a website/app and a willing policy writer. It can seem like you against the world. Don’t use this as an excuse. Instead, think of it as a clarion call to stop being a generic office and start being different — in terms of both marketing and sales.

Are excuses that important? 

As Jeff Goldblum’s character Michael famously said in The Big Chill, “I don’t know anyone who could get through the day without two or three juicy rationalizations. They’re more important than sex. . . . Ever gone a week without a rationalization?”

Excuses are normal, everyday occurrences. It’s common to imagine them. Just don’t let them interfere with the growth of your agency. Let your endless competitors get lost in the rationalization maze instead.

This article first appeared in Insurance Journal

Booze, Birds, Fast Cars—and New Priorities for Marketing

I was intrigued if not slightly jealous about the results of a survey of the 3,000 new millionaires from the UK Lottery, and how they spent their money. Among other things, they spent £463 million ($740 million) on new cars, which equates to £155,000  ($249,000) a person. That’s a lot of new metal. I do hope they bought insurance, as well.

Receiving unexpected money can be a pleasurable challenge, and a similar question was asked of UK marketing professionals. According to a recent survey into marketing confidence, conducted by the Chartered Institute of Marketing in the UK, most marketers would use additional funding like this:

  • 19% — Run a new campaign or idea
  • 18% — Invest in brand building 
  • 17% — Increase headcount
  • 13% — Investment in research and insight
  • 12% — Invest in analytics
  • 10% — Develop skills
  • 10% — Top up existing campaigns
  • 1% — Other stuff

I wondered if the questionnaire could have been worded differently. Had it provided the option to “invest in your technology and people, so you have a deeper insight into your customers,” the results (from the same data, just regrouping three of the categories) might have been:

  • 35% — Invest in your technology and people to gain deeper customer insight
  • 19% — Run a new campaign
  • 18% — Invest in brand building
  • 17% — Increase headcount
  • 10% — Top up existing campaigns
  • 1% — Other stuff

Would better customer insight influence the decision for a new campaign or topping up of existing ones, or provide better insight into consumer sentiment? Certainly the evidence is that effective use of analytics optimizes the marketing process, and an ROI isn’t difficult to find. 

All this seems to point to a new generation of marketers that is emerging – marketing professionals who are customer-, segment-, channel- and technology-savvy. These marketing professionals embrace technology as the key enabler, rather than feel threatened by it, and are the ones most likely to put more funding into technology and people development, rather than doing more of the “old stuff.”    

In the current economic climate, where cost-cutting is prevalent and having additional budget is a rarity, it’s critical that current funds are used effectively. How insurance marketing organizations prioritize their spending is increasingly a critical success factor.

Establishing the right priority is always a challenge, especially where there are multiple stakeholders.

Jerry McGuire simply said, “Show me the money,” reminding us all of the need for a solid benefit case. 

George Best, Manchester United and Irish international soccer player, had his own particular view on life and priorities: 

“I spent a lot of money on booze, birds and fast cars. The rest I just squandered.”