For years, the North Carolina wind pool — officially known as the North Carolina Joint Underwriting Association and North Carolina Insurance Underwriting Association (NCJUA/NCIUA) — offered protection limits up to $1.5 million. In those days, agents active in the hurricane-prone state could easily place wind exposure there, even for high-value homes.
Times have changed. With its exposures deemed to have grown too large, in 2009 the pool decided to limit wind coverage to $750,000 on new and renewing policies. Immediately, securing wind insurance became a problem for owners of the many North Carolina homes whose values exceeded the new limit. That forced agents to scramble to find additional protection from a major hurricane. The wholesale market was waiting with a solution.
“On the day the North Carolina pool announced the change, we were ready with a Lloyd’s of London non-admitted product to meet this need,” explains Kasey Vaughn, Branch Manager for Burns & Wilcox Morehead City, N.C.
“We had been writing the excess wind coverage in an exclusive arrangement with a London market, but never saw a big demand for it until that change,” elaborates Vaughn. “We quickly made agents aware we had an easy solution for them that required a one-page application, and that we could turn quotes around in minutes. The floodgates just opened.”
Wholesalers as Difference-Makers
For Burns & Wilcox, handling the sudden influx came down to leveraging its strong relationship with Lloyd’s of London to increase capacity. For an agent seeking additional coverage for a high-net-worth client, though, it was a crisis averted.
Wholesale brokers play an important role in placing high-net-worth personal insurance on several fronts. They can tap the excess and surplus (E&S) market for windstorm, earthquake and flood insurance that is difficult to secure in the admitted market. For a property that has had a serious claim or a notorious owner, they can find coverage by adjusting price or terms to make it appealing to an insurance carrier or in the London market. And they can help a retail agent who lacks access to a carrier that handles high-value personal lines to gain that access.
“A lot of the insurance relationship depends on being comfortable with your agent and realizing that they know where to go to get them what they need,” says Heather Posner, regional marketing manager for Private Client Group, a Cleveland, Ohio-based division of Chartis. “Wholesalers provide that service” so agents can live up to clients’ expectations.
Posner explains that the Private Client Group limits its agent and wholesale broker appointments to about 1,200 agents nationally because “we want to work with people who regularly deal with high-value homeowners,” and who understand how Chartis’ products deliver value to the high-net-worth segment.
With the wide variety of coverages and so many single accounts with multiple homes, “personal insurance can be complicated — almost like a small business risk,” she says. “A wholesaler who deals with us day in, day out, will have the expertise to educate the agent on the benefits of our products” and on the questions to ask upfront. The process of underwriting and covering high-value property becomes more difficult when agents must go back and forth unnecessarily between client and carrier because they haven’t asked the critical questions.
The E&S Edge
Besides streamlining the process, a knowledgeable wholesaler can use his or her access to admitted and nonadmitted markets to find a good coverage fit. Sometimes, E&S access may yield significant premium savings. For example, an admitted carrier covering a home will automatically add coverage of 70 percent of the property’s insured value for contents, 30 percent for other structures and 40 percent for loss of use. The insured pays for this, whether it’s needed or not. An E&S policy does not have such a requirement.
“If an agent comes to me for a quote on a second home, I’ll immediately ask if he needs all the additional coverage,” says Vaughn. He may not have another structure on the property. Since this a second home, the 40-percent loss of use coverage probably is unnecessary, since he can always return to the primary residence while the vacation home is being repaired or rebuilt. And the 70 percent coverage level for contents may also be too high, particularly if the quality of furnishings doesn’t match the value of the home (as is often the case with vacation rental properties). Finding those excesses can lead to substantial premium savings.
Wholesale brokers who understand the distinct risks and products associated with the high-value segment, and who have solid specialty carrier and E&S relationships, are positioned to place business quickly. “It’s all about timing and turning quotes around quickly, says Matthew Brady, Underwriting Manager at Burns & Wilcox Dallas/Fort Worth, Texas. “Often the first wholesaler to get the quote out in front of the retail agent will have a better chance to bind.”
A wholesaler’s ability to write the entire account is another plus for the retail agent, adds Brady. Recently, his team was approached by a mid-sized agency that was trying to win a very large, complicated account involving the officer of a large technology company. The client needed to insure four homes — two of them coastal — and buy windstorm coverage. The client also had a large schedule of personal property, including jewelry, furs, guns and collector’s cars, and wanted a $50 million personal umbrella along with primary flood coverage. The agent worked for several months with one of Brady’s underwriters to collect additional information and put together a competitive quote for the entire account. The quote was accepted, the agency won the business — which amounted to about $85,000 in premium — and the agent secured a promise from the client of additional business on a fifth home he was acquiring.
Insuring the affluent is complicated, but at the end of the day, what gets business done is the relationship and trust among agents, wholesalers, and the market.
“Knowledge, dedication and an ability to work with this market are what we look for in a wholesaler,” says Posner. “We have limited appointments and use them wisely.”