31 Aug Moving a Book of Business – Some Key Issues
Virtually every day, agents will move an account to a new carrier. Typically, the basis for the move is due to the desire to get a lower premium for the client. This issue has developed into one of the bigger issues/concerns for E&O carriers. The concern is that when you move an account to a new carrier, there is the possibility that the “new” coverage is deficient in some areas. The best practice is to proactively advise the client (in writing) of those areas where the coverage is not as broad as the expiring policy.
There are other times when the agent is forced to move an entire block of business to a new carrier. Possibly the agency was not meeting the volume requirements of the carrier, prompting the carrier to terminate the relationship, or the carrier may be revising the territories or coverages they are offering. I have seen several situations where an agency had to move an entire book of business because the carrier caught the agency misrepresenting the risks they were submitting.
It could also be the agency’s decision based on various claims or underwriting issues, or the agency wants to trim the number of carriers they have. The possibilities could go on and on.
This now results in the agency needing to move an entire book of business with that carrier to one or multiple carriers. The issues are largely the same, whether one account or an entire book is moved to a new carrier.
The best approach is to strategize how the agency is going to handle this proactively. The prior carrier may have had excellent rates, and thus when moving the account to a new carrier, the client could potentially wind up paying a higher premium. Whether the premium difference is major or minimal, it is probably best to notify the client of the need to place them with a new carrier and any potential premium issues. If there will be some coverage issues, the client should be advised of these coverage issues in writing (definitely for any reductions in coverage).
When moving an entire carrier book, there is the possibility that multiple carriers will be considered. For each carrier under consideration, an analysis of the coverage should occur comparing the existing coverage to the “expiring.” Certainly, some of the coverage differences might be “subtle” due to a difference in the edition dates of the forms. I have seen this frequently dealing with homeowners’ accounts. The bottom line, the analysis should be performed. In addition, extreme caution should be exercised on how the message gets delivered. A statement such as “we need to move you to a new carrier, and the coverage will be even better than what you had” could come back to haunt you.
Moving an entire block of business to new carriers will certainly be a lot of work involving the completion of new applications, etc. Determining the key steps should make the process go smoother, with one of the key steps involving what premium and coverage differences the client will face. Focusing on strategizing and premium/coverage analysis should greatly minimize the potential for E&O headaches to occur.