Helping Clients Navigate the Hard Market Minefield
Insurance | Mike Schofield, MiniCo Insurance Agency | Jul 25 2022
Sponsored content from MiniCo Insurance Agency
For the past several years, catastrophic insurance claims of all types have been occurring more frequently and with increasing severity. The National Oceanic and Atmospheric Administration (NOAA) reports that the number of weather events with losses over $1 billion has risen dramatically since 1980.† Billion-dollar weather events in the decade of the 1980s totaled 31 as compared to 128 events in the decade of the 2010s. Insured losses for each period also increased from $195 billion to $891 billion. If you’re seeing double-digit premium increases at policy renewal, trends like these are a big part of the reason.
From an underwriting perspective, MiniCo is seeing changes in the property marketplace based on severe weather conditions in several parts of the country, particularly the increased frequency of hurricanes in the Gulf States and wildfires in California. Our underwriters are also seeing higher rates and increased wind and hail deductibles to address losses due to convection storms and ice storms. As a result, many domestic carriers are withdrawing from high-exposure areas or applying higher deductibles and increased pricing. The London markets are also responding with higher wind deductible and rate increases in the Gulf States and other high-wind areas.
It's not possible to control the weather, but insurance professionals can educate their clients about these industry trends and what they could mean in terms of policy premiums, terms, and coverage eligibility. In addition, clients need to understand the role they play in protecting themselves from out-of-pocket exposures while improving their risk profile in the eyes of an underwriter.
As carriers seek to reduce their exposure to catastrophic claims and construction costs remain elevated, it is vital for policyholders to understand the potential exposure they may face by not setting property valuation at an appropriate level. Claim payments are tied to property valuation in many cases, and it can come as a disastrous surprise to discover post-loss that the valuation on the property is not sufficient to repair or rebuild.
Business Income Coverage
In the event of a catastrophic loss to a commercial operation, business income (or business interruption) insurance is vital to an operation's survival. This coverage is one of the most complex, least understood, and most undersold insurance coverages available to property owners. Not only should brokers counsel clients about the benefits of business income coverage, there also needs to be a detailed explanation of the documentation required to file a claim. Successful resolution of a business interruption claim involves specific and detailed recordkeeping, so it is important that policyholders take steps to store records electronically or keep them where they may be protected from potential catastrophic damage to the property.
Documentation and Communication
Providing detailed documentation to an underwriter can make a positive impact on the premium, deductible, and terms for a renewal or new business property policy. The key is to communicate with your client to obtain the information and then present it to the underwriter in a way that effectively tells the story of the risk. Advise clients to keep meticulous records of past claims, corrective measures taken, risk management activities, employee training, policies and procedures, and maintenance, all of which may demonstrate that the property owner is actively working to minimize future claims. Property owners also benefit from providing detailed documentation about the property itself to include photos, videos, maps, diagrams, inventory lists, and more.
The insurance marketplace is adjusting to respond to the rising trend of catastrophic property claims, and both insurance professionals and policyholders can expect to see significant changes. Arming your clients with the latest information and strategies to enhance their risk profile is a value-added service you can provide that may pay dividends in the near future and beyond.
†NOAA National Centers for Environmental Information (NCEI), U.S. Billion-Dollar Weather and Climate Disasters (2022). https://www.ncei.noaa.gov/access/billions/, DOI: 10.25921/stkw-7w73
Mike Schofield is the Chief Revenue Officer (CRO) of Jencap Program Administrators, a division of Jencap Holdings LLC. He has more than 35 years of executive-level experience in the insurance industry with the last 20 years serving as the top executive of MiniCo Insurance Agency, a Jencap company. Mike holds a B.S.B.A. in Management from Lamar University.
Tags: Insurance , Sponsored Content , MiniCo Insurance Agency