It has been widely reported that the insurance market place is challenging, and practices preparing for renewal may find a toughening stance from insurers.
A number of factors are influencing the prevailing market conditions, but the two most impactful are:
Lloyd’s of London financial performance showed that between 2016 and 2018 60% of syndicates were unprofitable and underperforming. This identified non US PII as the second worst performing class of insurance within Lloyd’s and corrective measures are taking place. Many syndicates have reduced capacity, along with having an expectation to carry rate increases into 2019; when you combine these two factors it results in many of the syndicates having a limited new business appetite or ability for growth.
An increase in claims severity - with multiple loses breaching the compulsory primary layer of insurance. The most sizeable claims emanating from the following areas of practice:
- Commercial Work
- Depositor Funded developments
- Escalating Ground Rent provisions
- Wills and Probate
- Cyber Crime
A number of these practice areas have generated losses that have impacted both primary and the first excess layer insurers which could have a bearing on some insurers’ rates. It has already led to significant reduction in willing insurers to provide coverage for the first excess layer above the compulsory primary layer, often described as the working layer so premiums for this layer of insurance are guaranteed to rise.
Despite the challenges highlighted above, practices can still navigate through any potential insurance market turbulence ahead, proving that they present a detailed presentation and they are supported by some expert broking. Ultimately those active insurers will wish to align themselves with good businesses. It is therefore important that you take a proactive approach to demonstrate this to insurers. You can do this by following these steps:
Step 1 Act early - begin the process early, capacity may diminish closer to the renewal date so it’s imperative not to close off potential avenues due to poor timing.
Step 2 Completion of your proposal form - do so with utmost care and attention, ensuring that your work split adds up to 100% and that you answer all the applicable questions. If any question specifically requests additional or supporting information, please make sure that you provide this. If a yes or no answer does not quite work for your practice and the way that you do things, please make clear reference and provide further explanation. Wherever possible complete the proposal form on a computer to ensure that it is legible and easy for an underwriter to understand.
Step 3 Claims information - Provide updated claim summaries even if you have had no claims as insures will require this information to satisfy their underwriting file. Your representative should be able to obtain these for you with your writing permission.
If you have had claims or there are open reserves then an overview of what happened, and what lessons have been learned to prevent these from occurring in the future. If you have notifications open with no reserves, provide your view on both merit and quantum.
Step 4 Distinguish yourself from the crowd - As a proposal form generally provides the numeric data that an insurer can use to load up their pricing tool. It is the softer facts about your practice along with some expert broking that provide them with the necessary ingredients to deviate away from their technical pricing with this in mind, it would be prudent to provide a foreword about your practice.
This may include, a brief history how you have got to where you are today, the management and structure of the practice, your client base, along with your approach to quality control and risk management it is however important to be proud of the accomplishments of your practice.
It is likely you will be vying for the attention of underwriters with hundreds of your peers. With this in mind, it is important to provide a quality presentation that provides the underwriters with a good insight and understanding of your practice but do so succinctly and do not drip feed information as this will put underwriters off.
Select the right representative for your firm
Direct access to leading insurers
It is incredibly important to prevent unnecessary links in the chain. Ignoring the delays that this may create in the event of a claim materialising, the immediate issue could well be in the forthcoming negotiation.
Additional and unnecessary links in the chain distance your practice from the underwriter and insurer. It can create unnecessary delays in the process and could result in your message to insurers being diluted too. The more people in the process can mean increased premiums or that you don’t get appropriate service.
Experience and expertise
Work with a broker, who has an understanding of the legal and the ability to appropriately articulate your practice to insurers. Choose a broker who can guide your practice and provide appropriate advice to you on policy and issues that may affect you. Furthermore, whilst no practice wishes to experience claims, you may wish to select a representative that has the appropriate resources and expertise to help you, when you will need it most should the need arise.
Strategy and timing
We recommend approaching the market in good time, but it is equally important to present your practice well, so do take time over this. An underwriter will put their company’s capital at risk when they insure a practice so it is important that you help them make a positive decision about your practice.
If you provide your chosen representatives your detailed presentation 6 weeks prior to your renewal date this should be enough time to explore the market and present terms to you. The later you leave matters, there is more risk of encountering reduced capacity and less choice for your practice.