12 Jul E&S – Opportunity or Nightmare ?
It is interesting that in the past couple of months, I have been requested by a number of the E&O Plus agencies I am honored to work with to provide some further training (virtually) on the issues associated with the Excess & Surplus Lines marketplace.
I have always been a big fan of the E&S industry. I also managed the Utica E&O operation and its E&S division for many years. This experience gave me a first-hand view of this marketplace and what makes it unique from the standard carrier side of the business.
Undoubtedly, the E&S marketplace provides tremendous benefits and access to a wide variety of specialty or hard-to-place business. Most agencies would not be able to achieve success without a solid handle on the capabilities of the E&S market. However, it is also a segment of the market that can be a “nightmare” if not handled properly.
Let’s look at some of the key issues:
– The app. While most E&S carriers are willing to quote from a common app. Things can get a little sticky when it comes time to bind. There is certainly the potential that the specific carrier will require its own app to bind coverage. It is best to know that as early as possible.
– The timeline. Depending on the status of the market, it may take the E&S wholesalers longer to work on an account. During a hard market, it is best to allow 60-90 days for a proposal. Agencies should periodically follow up with their wholesalers to determine where the app is in the pipeline. You don’t want to encounter a situation where the account renews tomorrow, and you still don’t have a quote.
– What was quoted. This can be a HUGE issue. When the agency receives the E&S proposal, there is a good chance it does not include all the coverages requested. Thus, it is critical to review the proposal to determine any requested coverages that were not quoted. It is up to the retail agent to identify these differences, not the wholesaler. There is also the possibility that the E&S proposal includes several limiting endorsements, such as the Classification Limitation Endorsement, common with contractors.
– The proposal. When the agency proposal includes coverages proposed with an E&S carrier, the proposal should contain language which notifies the client that if coverage is to be bound, the producer/agency would need to be notified at least a few days before the effective date. Since agencies will need to contact the wholesaler to get the coverage bound, two or three days before the effective date should be factored in to allow the binding procedure to be properly handled.
– Binding / the binder. First, retail agencies must recognize they do not have the authority to bind coverage (or to issue a binder) because they are technically not the agent of record – the wholesaler is. Another important issue is that there is a good chance that if coverage is requested to be bound after the requested effective date, the E&S carriers will not backdate the coverage. This could leave an account with no coverage for a period. Unless the agency has received written authorization from the wholesaler to issue a binder, a binder should be requested from the wholesaler.
– Certificates. The same premise dealing with getting binders issued also applies to issuing certificates. There is a good chance that since the wholesaler will not want to issue the certificates, they will allow the retail agents to issue them. This grant of authority should be in writing.
Some of these issues can be potentially managed/alleviated by the wholesalers you work with. The key is to develop a solid relationship with them, which will increase your effectiveness/success and hopefully reduce the inherent issues associated with this segment of our industry.