A hard market may be a compensation boon, but skyrocketing rates have seen brokers burned in a classic case of shoot the messenger.
Many would rather be breaking better news.
“There is additional compensation that can come with the hard market,” Jeff Lagos, Insurance Office of America (IOA) CEO, told IBA. “However, I think that if you held a secret poll of our team, they'd rather be delivering rate decreases than rate increases.”
IOA is headquartered in Florida and has its second largest state presence in California. Both catastrophe-prone states have grappled with soaring property insurance prices and shrinking availability. In cases, staff have had to deliver the bad news of premium increases spiking by as much as 200%. Shifting building values are driving property insurance prices up. With pure premium dollars rising, some clients have been forced to trim down coverage and take more risks themselves.
“Our teams really feel that pressure, they take it personally, they want to deliver the best results that they possibly can for the client,” Lagos said. “And when those the best possible results are painful for the client, that's painful for our team, too.”
Jeff Lagos, IOA CEO
Some of IOA’s newer talent have never known anything but a hardening or hard market. Even experienced hands may not have gone through anything quite like it, with brokers pointing to the last truly fleeting but hard market as having taken place post-9/11. That’s more than two decades ago.
Communication and leaving no stone unturned in the quest for the best coverage is key to IOA’s approach.
“We have to do a really good job of communicating with the client early around what's going on in the marketplace, this is the effort that we're putting in,” Lagos said.
Neither the client nor the broker may “like the message”, but open communication helps the former understand that the team has done its best to get the right program in place.
Lagos was hopeful that some of the pressure is set to shift off property. The line has shown signs of leveling off in pricing terms, driving much needed relief. But the IOA CEO was concerned around an excess liability tightening impact on clients, particularly around commercial auto.
“This harder market, from a casualty perspective, could really have a much more negative impact on businesses and personal lines as well,” Lagos said. “Buying excess coverage to protect from the worst possible liability case is really important, and for a client to go underinsured because of premium dollars could be something that that causes them a lot more issues and pain than paying the extra premium.”
Regional and group-wide leaders at Higginbotham have also seen a tough market for auto, particularly on the business side. Umbrella markets are also proving a challenge, with primary limits accessible but higher limits stretching into the surplus lines market and proving expensive.
“It's always comical – there's a big disconnect, in my mind, between what the carrier community says and what is reality in terms of what you deal with as a broker,” Higginbotham CEO Rusty Reid told IBA. “You're going to always have to be cognizant of making sure you have the right lineup of trading partners so you can deliver incredible options.”
Rusty Reid, Higginbotham CEO
Clients have looked to higher deductibles to keep premiums in check. On the catastrophe-exposed coastal property side, Reid’s team have seen rate hikes of up to 60%.
“It's tough,” Reid said. “Particularly in the property and auto lines, and that's agnostic – personal or commercial I don't think it matters, and so you've just got to be innovative.”
In the face of market pressures, insurance agents are increasingly prioritizing markets that offer commission, competitive rates and high risk or hard-to-place solutions. This is according to survey responses collected by insurance technology business Appulate.
With some agents and brokers looking to a shotgun approach or seeking out every feasible solution, faster quotes also rocketed up priority lists.
Agents surveyed were asked to select all that apply:
|
2020 |
2021 |
2022 |
2023 |
*4-Year Trend |
||
|---|---|---|---|---|---|---|
|
1. |
Instant Quotes |
71% |
66% |
72% |
80% |
+10% |
|
2. |
Competitive Rates |
29% |
37% |
49% |
65% |
+27% |
|
3. |
Fast Quote Turnaround |
27% |
34% |
45% |
61% |
+26% |
|
4. |
Binding Authority/Control |
12% |
15% |
26% |
41% |
+23% |
|
5. |
High Risk or Hard-to-Place Solutions |
19% |
21% |
22% |
40% |
+18% |
|
6. |
Better Commission |
12% |
15% |
25% |
40% |
+23% |
Source: Appulate Agent Survey 2023
On paper, rising rates may intuitively look good for brokers – and there are top line benefits. But with clients feeling stretched, higher prices may not always translate to more premium pocketed, and good brokers will be working to the maximum to deliver results and retain business.
It’s a dynamic that analysts and others don’t always get, Brown & Brown CEO Powell Brown pointed out in the brokers’ Q4 2023 earnings call.
Stressed buyers have a propensity to “shoot the messenger” even if they are getting the best possible product, Brown told investors.
“It can be about rate, but really, it's more about the absolute dollars that the insured has to pay, and so there is a lot of chafe when their exposure units are flat to down and their premium dollars are going up – that's the way I try to put it,” Brown said.
Have you felt the hard market pressure? Share your experience in the comments below.
