Reasons to Look Beyond Price in 2011

Just weeks into the New Year, the experts’ predictions appear to be “more of the same” for at least the first half of 2011: super soft pricing combined with increased availability of limits and coverage. While this is great news for the nonprofit and social service sector, it can be challenging for agents and brokers who must advise insureds in the art of prudent insurance buying, especially when facing the myriad of carriers and premiums. For 2011, a good practice might be to encourage these clients look beyond price as the sole determining factor for choosing a carrier.

Typical of any soft market, the past several years have seen a slow creep (that seems to have advanced to a full sprint!) of admitted insurance carriers reaching far beyond their normal market appetite. In an effort to gain additional premium revenue flow, many carriers have expanded their underwriting capabilities to include nonprofit organizations and social service agencies. As recently as just a year ago, many of these same carriers would not have touched this class. Of course, to meet investor expectations, their pricing is extremely aggressive and, in some cases, appears to be below cost.

Agents and insureds must ask: What will happen to these low cost carriers, with no experience in this specialized niche, when capital dries up?

When analyzing the pricing variances today between the many carriers that offer insurance programs for the nonprofit sector, agents need to consider the risks associated with working with low cost carriers in this soft market. Will those carriers decide to pull out when the marketplace takes a turn and begins to firm into a hard market? Are the carriers that have recently begun servicing nonprofits in it for the long haul? Will the carrier renew these client next year, take a significant rate increase, or decide to get out of the nonprofit or social service agency market altogether?

In order to mitigate these risks, agents and brokers would be wise to:

• Research how much experience the carrier has in this specialized niche.
• Know the reputation of the carrier on its claims handling attitude and bedside manner.
• Research a carrier’s rating with A.M. Best and other agencies, as well as the long-range outlook.
• Trust their gut; if an admitted carrier is offering coverage or pursuing a class of nonprofit that has traditionally been served by the non-admitted marketplace, agents should proceed with caution — it has been in the non-admitted market for a reason.

Choosing carriers that are financially stable, have consistently demonstrated underwriting discipline year after year, and enjoy a long-standing reputation in the nonprofit and social service market will improve the chances that the carrier an agent chooses to work with today will be there for tomorrow.

In addition, when looking at the low cost carriers, agents should compare the services offered by other carriers in the same market to determine if there is any loss of services. Do they offer loss control services to clients? What type of on-line “self service” risk management resources do they offer? Agents can help their clients by determining if there’s more than just an insurance policy behind their purchase.

Agents should look beyond price in 2011. Aligning with a strong, reputable carrier that understands the agent’s business and has experience in the client’s specialty market will decrease the chances that the client will be looking for a new carrier — or agent — tomorrow.