Working with inexperienced Insurance Producers, I am aware that the
concept of analyzing risk can be quite foreign to those newer to the
industry. I'm finding that there is a lack of knowledge in the proper
placement of risk in the personal insurance arena in general. I'm
hoping to make that concept a bit easier to understand by examining
what components of a risk need to be considered when making carrier
placement decisions.
The widespread use of comparative raters has been the one factor that
may confuse insurance personnel the most. Technology has advanced
tremendously in the past several years, but none of the raters
adequately have the ability to analyze a risk and eliminate the rates
of carriers that do not even want that particular risk. If a rate
comes back and they are competitive- they must want the risk- right?
Overwhelmingly, the answer to that question is NO! In personal lines,
we are typically starting the analysis by determining if a risk is
"preferred" or "standard/non-standard." Here are the characteristics
of a "preferred" risk:
- Positive physical attributes of property to be insured. Homes need
to be well-maintained and depending upon the year built, updating of
plumbing, roof (except some tile and slate), wiring and HVAC systems
must be done in the past 30-35 years. Autos need to also be well-
maintained and free of any damage. Pride of ownership is evident.
- Loss history is clear. A preferred risk has no losses in the past 5
years. A water loss or liability loss may indicate an exposure that
may have a higher probability of having another loss. For property
exposures, losses follow the insured. If you have an insured that
owns multiple properties and the home is loss free but the rentals
have losses; those losses will be taken into consideration on the
home when determining the eligibility of the risk. This is especially
true if the carrier will not be insuring the rental properties. You
need to understand those losses even if you are currently not
insuring those properties to have a discussion with the underwriter
on the merits of the risk. On auto, multiple not at-fault accidents
are generally precursors to an at-fault accident.
- Be aware of trends in the marketplace and how your risk may be
affected. For example, in recent years in Southern California, water
losses have been extremely prevalent among houses with a certain type
of plumbing and with certain years built. Your prospect may have a
higher probability of loss due to these external factors.
- Insured wants proper insurance to cover assets. A preferred client
understands that losses filed will be catastrophic in nature and not
maintenance issues. They also understand the value of high
deductibles because the long- term cost savings due to reduced
overall premiums paid is in their best interest.
- Understand lifestyle and hobbies. There is a difference between
having a large home to insure and a complex lifestyle. Insureds with
large schedules, frequently travel, loan artwork to museums, have
in-servant exposures or own "toys" belong in a "High Value " market
as their lifestyle requires additional expertise at the time of a
loss not to mention that they tend to have higher expectations of how
a claim will be handled in general. Placing these risks in a "Middle
Market" does a complete disservice to the client.
- Bills are paid on time. Clients that have billing issues or
regularly get late notices do not belong in a preferred market.
Choose lump sum or Recurring Credit Card/ EFT for best retention and
fewer phone calls.
- There should be an expectation that you will place the entire
account. There is nothing positive about writing a mono-line policy.
Even if the other policies do not renew for several months, you need
all information when writing the first policy to make sure you are
able to determine the best "home" for that particular client. The
retention is higher (the only way you make money), another agent does
not have the opportunity to market to an "existing " client, the
client gets all the account discounts available which can be
substantial and you will know that all of the clients exposures are
being properly insured.
- Prior insurance with high limits exists. Preferred carriers are
offering their best rates to clients who qualify. Prior insurance
with high liability limits reflects an attitude toward insurance that
the client embraces the value of being properly protected. Insurance
only works when the carrier is getting the proper premium for the
exposure.
- Profit sharing and protecting markets matter to the agency. Placing
risk with carriers with an appetite for that type of risk is
extremely important to the long-term success of the agency. Carriers
depend on their agents to be honest about the risk presented
otherwise these decisions will come back to negatively impact their
business relationships. It's extremely important to limit the number
of markets you choose to do business with so that you can understand
and keep up with changing appetites. You may want to assign each
staff member to be a carrier expert so everyone doesn't have to know
everything about every market.
It's really easy to get personally involved with a client or prospect
and want to offer them the best rate possible no matter what. Do so
at your own risk! This is a profession and you need the skill to keep
the business considerations foremost in mind when placing risk. If
you can do this, you will work in a business that can be very good to
you!
Sharon Graeter, CPCU is Co-Founder and Director of Development for
West Connect Insurance Solutions. She has 30+ years experience in the
Property/ Casualty Insurance business having worked for several major
carriers in Sales Management. If you are located in Southern
California and have an interest in a career that allows you to
enhance the lives of your clients while providing you with a great
lifestyle, contact our website for additional information at
http://www.westconnectalliance.com
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