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The Making of an Indispensible Insurance Retailer

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Making of an Indispensable Retailer

How intrepid brokers and agents are turning to the wholesale market to land business others are unable or unwilling to place

In the world of sales, it’s unacceptable, even downright sacrilegious, to leave a piece of business on the table. Yet insurance brokers and agents who aren’t well-versed or experienced in handling hard-to-place insurance may be doing exactly that, especially when it comes to finding a home for nonstandard business. They end up handing additional business that was well within their grasp to other, better equipped brokers and agents.

In a world where people crave the convenience of one-stop-shopping, the best-positioned, most successful brokers and agents are those who are resourceful enough to find ways of satisfying all a client’s property insurance needs, posits Bill Gatewood, associate vice president, personal insurance product and sales, at Burns & Wilcox in Farmington Hills, Mich. The size of the market, the shifting of insurance cycles and the value of the relationship all point to the importance of multi-market knowledge and cross-selling expertise.

Personal insurance is a significant business and “any broker or agent who relies on writing just in the standard market will miss out on the breadth of the marketplace,” he says.

Underwriting guidelines are partly driven by insurance cycles, so they open, then tighten, all the time. When the standard market becomes more restrictive and a broker or agent can’t find coverage through standard channels, there’s a good chance the client will turn to another retailer who has the wherewithal to place it in the surplus lines market. Not only is that business gone, when the market cycles back, the entire account could land with the other broker or agent, Gatewood says.

“And when a large VIP client is involved, failure to find coverage for the client’s secondary home or rental property or investment property in a coastal area can have a tremendous impact on the retail broker or agent’s bottom line,” he adds.

A broker’s access to the wholesale market also can provide protection for risks that are temporarily difficult to place, like those with loss problems, too many claims, credit issues or home maintenance problems. These issues could all be cleaned up in two to three years, then moved back to the standard market.

Helping High-Value Clients

High-value property poses unique coverage challenges, and though a broker or agent may have a standard market willing to write a property, he may be doing his client a disservice by trying to force a risk into an inappropriate carrier, asserts Pat LeBon, personal insurance manager and high-net- worth specialist in the Burns & Wilcox Chicago office. The complexity of the risk often requires the expertise of a wholesale broker and a market that can offer things like high limits, appropriate valuation and coverage for jewelry, fine arts and collections, as well as loss-control assistance. It’s a matter of having the diligence to explore other options, of not settling for standard when the surplus market can deliver more.

It is equally important that a carrier provides sophisticated claims handling and claims adjusters who understand the nuances and complexities of the cases they handle. “Things can go really bad when a client is completely unsatisfied with the claim service they receive” and decides to take their business elsewhere.

LeBon spends a lot of time educating brokers and agents so they can help high-value clients and prospects understand that independent retailers bring extra value they cannot get buying insurance online or through a direct writer. “I’ve seen an affluent homeowner insure a $500 ring but not the $50,000 Dale Chihuly glass bowl sitting on the coffee table.”

Similarly, she often explains to brokers and agents the importance of a wholesale relationship in helping them prosper. “If a broker or agent ignores surplus lines, he will not have access to those markets and will miss out on the ability to solve problems for current and future clients,” says LeBon.

Staying Buoyant in the Marine Market

Boat ownership is rebounding from the economic downturn five years ago, so brokers and agents are confronting marine risks once again on a larger scale. Unless a retail broker owns a large boat or is thoroughly enmeshed in nautical culture, it can be extremely frustrating to place watercraft without a knowledgeable wholesaler’s help. Marine insurance is quite specialized, and most retailers rarely handle enough of it to develop the expertise and markets to do it well, says Erin Deaton, senior underwriter in the Burns & Wilcox Marine Center of Excellence, in Farmington Hills, Mich.

“A broker or agent might be writing a large package in Michigan for an affluent client who has a boat docked in Florida that they can’t place,” she explains. “As big a challenge as market limitations on a specialized line of business can be to the average broker or agent, underwriting it requires the knowledge to ask the right questions to properly assess the risk.” That is where they should look for help to keep accounts from going to another broker. Once you let a single piece of an account leave, it leaves the rest vulnerable.

For example, the insurance industry requires a survey document that typically runs 30 pages or more, and is filled with nautical terminology and technical information. Not only can this inspection save lives and property by uncovering fire hazards and problems with the bilge or hull that need to be addressed to keep the boat afloat, it can sometimes save the retailer’s reputation and binding authority, according to Deaton.

In a recent case, she reviewed an application, made some calculations based on the information provided and information she obtained from a web search, then easily determined that the boat in question had a top speed of 95 miles per hour, not the 50 mph the new owner claimed, raising suspicion and sparing the retail broker a problem client. Proper underwriting at this stage also guards against a future loss being declined due to material misrepresentation of risk, as might have happened had the information gone unchallenged.

She occasionally encounters a “paper boat” situation where a client attempts to buy insurance for a fictitious boat, and, if pushed for a picture, might pass on a stock photo of a popular boat as his own. A broker who deals regularly with marine placements is aware of red flags and can spot this or a hull identification number, for example, that doesn’t follow the appropriate formula. In most cases, though, perpetrators will stop at the point they are required to sign a completed application.

Happily, most clients are forthcoming and simply want good coverage at a fair price and perhaps a little advice on hurricane preparations or where to find a boat captain. A high-quality wholesale partner, she notes, can help a broker or agent assist a client with any of those.

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