17 Oct Do You Need to Move a Block of Business?
With increasing frequency, the marketplace is in a state of disruption. Most of the disruption is likely the result of Mother Nature. This results in carriers exiting the marketplace in specific states or specific lines of business. In some cases, carriers are moving specific books of business to their surplus lines carriers. The bottom line: this is putting additional pressure and stress on agencies to deal with the disruption and develop a plan of attack on how best to handle it.
This blog has provided numerous thoughts on the issues involved when agencies are remarketing an account at renewal and potentially looking to propose movement to a new carrier. The key issue has centered on the need to analyze the proposed policy language and, at minimum, bring to the client’s attention any areas where coverage is reduced. Failure to perform this task could expose the agency to allegations that they misled the client and that “the client assumed that the replacement coverage was at least equal to the expiring coverage.” Current estimates are that around one-third of all E&O claims involve this allegation.
But what if the scenario involves more than moving just one client to a new carrier? What if the agency faces replacing an entire book of business due to the carrier exiting the marketplace? While on the surface, this sounds like a daunting task, there is an approach many agencies have used.
- First off, getting a full assessment is paramount. What coverages are involved, and when is this going to happen? Senior Management needs to be involved to determine the desired course of action. This could involve to what degree the agency has carriers that would be interested in this disrupted business.
- The agency will probably want to get out front with this issue and to communicate to the clients affected what the agency plans to do. Without this agency communication, clients may make their own decision and begin contacting other agencies. The agency’s handling will probably be determined by to what degree the agency wants to keep this business. Either way, it is still suggested to communicate with the client. This will avoid the scenario of the client “assuming” the agency would replace the business. If the agency does not have a replacement market, tell the client and encourage them to contact other agencies.
- Presuming the agency wants to retain as much of the business as it can, look to determine what markets are viable options. There is the definite possibility that the coverage with one or more of these “replacement” markets will provide coverage that is not equal to the expiring coverage. The suggestion is to complete a full-blown analysis comparing the expiring and replacement forms. A side-by-side is probably the best option to determine what coverage is better and what is being reduced. As the agency interacts with the client, this side-by-side will be very helpful. Providing this analysis to the client shows the coverage differences. It also displays a solid level of professionalism for your agency. The side-by-side needs to be very thorough so the client can make an educated decision, as at the end of the day, the decision should be the client’s to make.
- Getting the client’s decision in writing (whether or not they stay with your agency) is critical.
Hopefully, through a well-thought-out approach, handling this market disruption will be less stressful.