This post is part of a series sponsored by IAT Insurance Group.
America’s coastal regions, especially Gulf Coast states such as Florida, Louisiana and Texas, have been hit hard in the past decade by natural disasters linked to climate change. In 2022 alone, damage from 18 separate weather events totaled $165.1 billion.(1)
A region’s exposure to natural disasters results in a greater likelihood of catastrophic losses, more property and casualty insurance policy exclusions, limited capacity, and, in general, less willingness from insurers.
Brokers are well aware of the challenges that arise from a difficult market, but the turbulent nature of the Gulf Coast region specifically means that brokers must constantly be aware of the presence of unique opportunities. With a little creativity, brokers can work with their carrier partners to put together a customized program for businesses in need.
4 strategies to consider as a broker:
The only constant, they say, is change, and that certainly applies to the Gulf Coast insurance market. Brokers who embrace this change will more easily find themselves in a position to uncover those unique opportunities. Here are four strategies to consider in light of current market conditions.
- Think outside the box. In a soft market, finding a carrier to place a full account is not much of a challenge. However, you may now need to find three or more different carriers to place the cover tower. Look for new markets that may specialize in one segment of risk, such as IE Liability, Liquor, Surplus, Wind, X-Wind, etc.
Being open to offering solutions as well, such as finding carriers that offer deductible buybacks, which allow the insured to pay a higher premium so that the deductible is smaller or nonexistent when the claim is made, can be a good solution. Another might be to consider self-insurance.
The cost of traditional insurance will likely be higher due to the difficult market but finding alternative solutions for insureds may provide a unique solution to their needs.
- Act as a trusted advisor to the insured. The more you can help educate your clients, the more they will view you as a trusted advisor for their business. As an expert, you can provide insight into what’s happening in the market, specifically the two main forces at play:
- The number of carriers was once much greater than it is now, which meant lower carrying capacity. Carriers writing in these areas will focus on the best risks and may include additional exclusions on the policy. Percentage deductibles are becoming more common today, so be aware of the actual deductible amount in the event of a claim.
- Inflation means that costs have increased throughout the economy, so the contractor who comes to fix the property costs more, and so on. Inform the insured of the importance of being properly evaluated in the event of a loss in today’s environment. If they cannot keep up with inflation by setting appropriate limits, they will likely go out of business in the event of a loss due to financial difficulties.
By treating your relationship with your client as an advisor – sharing the realities of the market as well as the many potential solutions they should consider – helps build trust.
- Go beyond the application. The more you know about your customer, the more opportunity you have to add value and reduce risk. This often involves looking beyond their answers to traditional questions in the application. Think about what they might have left behind. There may be real risks and exposures that are not immediately apparent.
Once you determine what these might be, you must decide what to do about them. What can they live without coverage? What are appropriate limits? This is where the medium can shine again. As experts, by thinking creatively, you can see where you can take risks for the customer. In a hard market, there are ten times more opportunities than in a soft market. This environment can be very beneficial for brokers who can be creative with policy boundaries, operate in a niche market and use their relationships in a positive way.
- Build on your existing carrier relationships. Insurance has been and always will be a relationship-based business. With overall insurance capacity restricted, carriers will be more likely to work with brokers they have a good track record with. As a result, the relationships you’ve been building for years are now more important than ever. In an environment with fewer carriers, continue to invest in the strong relationships you’ve worked so hard to build.
What comes next?
The future is always uncertain, but the effort an insurance broker puts in now will serve them well no matter what happens next. The market may eventually decline in the Gulf Coast region, but until then, the above strategies will carry you through the tough times and put you in a great position to thrive in the future.
Ask your loss control representative
Do you have a question about how to mitigate risks? Email losscontroldirect@iatinsurance.com for a chance to see your question answered in a future blog.
Written by Ben MacDonald, Vice President of Underwriting, Linkage Authority
(1) NOAA Climate.gov “$1 Billion Weather and Climate Disasters in Historical Context” January 10, 2023.
Threads
Real estate market pricing trends agencies
Interested in Agencies?
Get automatic alerts for this topic.