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Latest insurance industry news, with commentary.
NEWS OF THE DAY April 4, 2014
QUOTE OF THE DAY:

"Success seems to be connected with action. Successful people keep moving. They make mistakes, but they don't quit."  

Conrad Hilton
Hilton Hotels  

GOOD STUFF!

PERFECT FIT: THREE TIPS FOR MATCHING CUSTOMERS AND CARRIERS

PropertyCasualty360.com

April 1, 2-14

By Dina S, Schultz

Editor's note: Dina S. Schultz is vice president of sales and marketing, Society Insurance

What should you look for when trying to match a customer with a carrier?

We all know that relationships are essential when it comes to business insurance. Price is always a factor, but when it comes right down to it, I know as a carrier that our policyholders ultimately trust their agents. In situations where the price is at least in the same ballpark, an agent can guide an insured to the carrier he or she believes is the best choice.

But what carrier gets thus distinction as the best choice? It’s not the same for every customer; if it were, you’d only have one carrier. So what factors should be considered? What should you look for when trying to match a customer with a carrier?

If you’re interested in growing your renewal and referral business (and who isn’t?), it’s important to consider the carrier you’re recommending carefully based on these components: approach, coverage details, and, last but not least, the ability to cultivate a positive relationship.

Although not all of your customers will ultimately fall under this umbrella—let’s be real, some will decide on price alone—your best customers will be worthy of further consideration based on these criteria:

1, Approach: How does my customer approach the industry in which he or she works? Do I have a carrier that shares the same passion for an industry as the customer?

Let’s say you have a restaurant owner in front of you. She works long hours and faces innumerable challenges in the hopes of not being yet another local news story about a restaurant closing its doors for good.

Why does she do this? It’s pretty safe to say that she, like most restaurant owners, isn’t in it for the money. Owning a restaurant is a lifelong dream for her, and it’s not because she thinks she’ll become a millionaire by doing so.

She’s in the business because she takes a certain pride in her ownership of the restaurant. She tells you that the most satisfying part about owning a restaurant is seeing people who come to her establishment have a great time with friends and family, and then keep coming back again because they enjoyed the experience so much.

The point centers on this concept: If you’re looking to insure a restaurant owner who takes a clear pride in ownership, you want to match her with a carrier that has a similar passion for the restaurant industry. This goes even beyond specialized programs and coverages and straight to the core of who the company is. Whether preparing a dining experience or putting together a high-quality insurance program, it takes a deep passion to stand out and be among the best.

The important distinction to make in this example is that all restaurant owners that come to you looking for insurance might not fit with your “best” restaurant carrier. They’re not a good match if they have different priorities. A restaurant owner with a passion for the industry isn’t likely to be happy with being insured by a company that only dabbles in this market and doesn’t understand it. 

 2. Coverage Details: Do the coverage offerings match the coverage needs? This is a simple one, right? You know what your customer needs and that’s that? Maybe not.

With so many carriers and so many messages, it can sometimes be difficult to isolate what’s best for each business. While most carriers offer something as simple as Business Interruption insurance, individual coverages often vary in small but important ways.

Imagine that the power at a hotel goes down on Friday before a busy holiday weekend. All of its events are canceled, causing it to lose tens of thousands of dollars.Your carrier of choice at this point could make or break the future of that hotel. Although Business interruption is a standard policy, most carriers require a 72-hour waiting period before coverage kicks in.

In this instance, your knowledge of customer and carrier becomes paramount. If your customer can afford to take the risk of losing three days’ worth of business, you might be able to save a few bucks up front with Carrier A. But if you know the bottom line is tight, you’ll want to match your customer with Carrier B, which doesn’t have a waiting period for Business Interruption 

3, Cultivating a relationship: Deep down, do you trust this carrier to form its own relationship with your customer?

In the end, it comes down to relationships: in the same way you nurture a relationship with your customer, fostering a strong relationship between your customer and a carrier is the best way to maintain renewal business 

Of course, you can only do so much. Ultimately, the carrier you choose should provide more than just coverage to your customer. To maximize your renewal business, choose a carrier that will make your customer feel valued.

When bad things happen to your policyholders, every company will respond in some fashion; that’s the base expectation. Claims service and expertise come into play here, and are not to be ignored.  Carriers with strong claims representatives focused on taking care of your customers in a quick, responsive, and caring manner are key to your success.

However, the best carriers make an effort to be there when things are going well, too. These companies use cutting-edge technology to provide services that are both informative and selling tools to teach your customer why the company you’re trying to sell is the carrier of choice.

What does a company’s field representative or underwriter say when he or she stops by your office? What’s the tone of their communication with you? Does the representative or underwriter point you to things like blogs, case studies, and social media posts that you can share with your customers? Carriers that go the extra mile to give you this kind of information provide thoughtful leadership and are more likely to leave an impression with your customers.

Policyholders are the ultimate reason we’re in business. Without the policyholder, there literally is no business for any of us—and no reason to exist. Sharing the same beliefs with a carrier goes a long way in ensuring a solid and smooth relationship between the carrier, yourself, and your client. By taking a few extra minutes to consider the need to connect your customer to the right carrier, you can make the future a lot brighter for everyone involved.

A SIGNFICANT POTENTIAL MARKET

GETTING STARTED WITH START-UPS

By Laura Mazzuca Toops, 

Propertycasualty360.com 

April 1, 2014 •  

More than 20 million start-up businesses need the expertise only an experienced agent or broker can provide.

In a sign that the. economy is finally on the (gradual) upswing, the entrepreneurial rate in the U.S. is now higher than it was at the height of the dot.com bubble of 15 years ago, according to theKaufman Index of Entrepreneurial Activity (KIEA)—which currently lists more than 20 million non-employer businesses, with more starting every day.

The U.S. Census Bureau defines non-employer businesses as those that have no paid employees, have annual receipts of at least $1,000 and are subject to federal income taxes. These new businesses can range from part-time consultants to billion-dollar startups backed by big private-equity money.

However, no matter the size of the business, the journey to successful entrepreneurship can be treacherous. According to the Census Bureau, 16% of companies fail their first year of operation, and 32% fail within their first three years. Most of those failures are due to incompetence and lack of experience, according to a January 2014 study in Entrepreneur Weekly by the Small Business Development Center at Bradley University and University of Tennessee Research.

Based on a series of national symposia for agents and insureds hosted by the Travelers Institute, the public policy division of Travelers Insurance, the top issues for small businesses are regulatory concerns, licensing and OSHA compliance, health care, access to capital, and disaster and business continuity planning.

Small businesses are hard to run and insurance products can be life or death for them,” says Joan Woodward, president of the Travelers Institute and executive vice president of public policy at Travelers. “Our agents are trying to raise their awareness of that.”

However, But although most start-up business owners understand the need for basic coverage, they also underestimate how just one cyber breach, natural disaster, or nuisance employment lawsuit could decimate their business.

“Most small business owners think insurance is something they can put off until they get bigger,” says Tom Hammond, EVP of Farmington, Conn.-based Bolt Insurance Agency, which targets home-based businesses with 25 employees or fewer. “What becomes valuable is when you can explain coverage and match it with a price point that makes sense to them. We’re selling policies for between $300 and $700 all the time. When you tell someone what the coverage provides, most owners know it makes sense to buy if they have the exposure.” 

Spotting the Indicators

Although government initiatives like Startup America and the 2012 JOBS Act provide small businesses with additional support and easier access to capital, most insurance experts working with start-ups haven’t seen a correlation between the programs and new companies seeking insurance.

Rather, market supply and demand is the biggest driver of new business ventures, which are directly tied to the economic activity in a particular area—whether it’s a town, city, state or region, says Mike Berry, CEO of Specialty Insurance Managers, an Austin, Texas-based managing general agency. In his region, that means big growth in the oil and gas industry: These businesses attract new employees, around whom spring up supporting businesses such as hotels, restaurants, convenience stores and health clinics—which in turn spur new venture business.

Start-up businesses have always been a staple in the Excess & Surplus market because standard insurers prefer insureds with a minimum of three years in business, says Roger Ware, CEO of Genesee General, an MGA/wholesaler based in Alpharetta, Ga. Although 40% of Genesee’s business is start-ups, he says, “we didn’t target it; it’s always been there. We’ve just taken advantage of it.” 

Ware has seen an increase in start-ups beginning in about 2011, along with growing sales and payrolls of existing accounts, especially in construction—all of which points to a rebounding economy. “From 2007 from 2010, this was nonexistent,” he says. Ware he spotted the recession as far back as 2007 in shifts in the trucking industry, which he calls the “biggest indicator on the economy.” Transportation insurance requires filings on the number of units (trucks) a business operates, so when Ware began seeing trucking accounts going from 30 units to three, he knew trouble was coming

Today, the pendulum is swinging in the other direction. Case in point: Genesee had an industrial painting firm client with 30 years in business and $100 million in sales that went out of business during the recession, taking a number of subcontractors along with it. Today, this same firm is relaunching as a new business.

Average premiums for start-ups are 25% to 30% higher than the standard market, which translates into higher premiums for agents, Ware notes. [GREAT INCENTIVE] The downside is lower retention rates when those businesses either leave for the standard market or simply don’t survive 

The Educational Hurdle

Small start-ups need more than insurance. Because the owners wear many hats and can’t afford internal risk managers, they need a hands-on insurance agent who can act a resource to help establish formal safety programs and other risk management tools, says Linc Trimble, executive vice president, Torus eCommerce, at Torus Insurance. [HIGH TOUCH!]The needs are different for midsized and larger start-ups, which require customized solutions and more detailed evaluations, he. Basic coverage for a small start-up can be as simple as a BOP policy, or stand-alone General Liability and Property coverages, Commercial Auto, and workers compensation.

However, insurance requirements for new businesses can vary by state or class of business, so agents should know the laws and regulations for the type of business being underwritten, says Jason Belanger, senior broker at Burns & Wilcox. States and municipalities often require health care or recreation businesses to have proof of insurance before they are issued a permit to operate, he adds.

New businesses of any size face exposures that aren’t covered under the basics, including Environmental Liability, Professional Liability, D&O, Employment Practices Liability, Fiduciary Liability, Cyber Liability, Employee Dishonesty, Media Liability and International Travel, says Maura Verrone, vice president/underwriting for ACE Commercial Risk Services. Some of these policies might offer overlapping or limited coverage, which can cause more problems for small-business owners.

However educating small start-up owners about the importance of this coverage can be frustrating. “We sell and recommend E&O, EPLI and Cyber Liability, but they don’t buy it,” Ware says. “Many have gone from the private sector to consulting and are now independent contractors, such as construction managers. They have huge Professional Liability exposures, but they’re not asking for this. Agents explain it, but it doesn’t sink in. There’s never an issue until there’s a claim.”

Particularly for new small businesses, such losses can be catastrophic. “Start-ups face similar risks as established businesses, but the potential impact of any claim is much more devastating for a start-up that hasn’t generated much revenue yet,” Belanger says. “The defense costs for one frivolous Employment Practice Liability claim could potentially wipe out a new business’ cash reserve, which is crucial to its survival. So it’s important to work with a retail agent to ensure adequate and comprehensive coverage for all risk exposures.”
The independent agent advantage

As with most lines, direct writers have made inroads into the start-up specialty, although they currently only control about 4% of the market, says Hammond at Bolt. Part of the reason why independent agents own this segment of the business market is because of the wide variance in types of businesses insured. “No direct writer has a product that can span from a management consultant down to a contractor or carpenter,” he points out. “The product needs to be diverse.”

Bolt actually partners with direct writers to underwrite start-up businesses. “We’ve seen partnerships with direct writers as being very valuable to us because we’re able to take any business they can’t write and fill that gap and maintain their brand,” Hammond says.  [CREATIVE!]

On the whole, however, independent agents deliver more bang for the buck, including access to multiple carriers in various industry groups in both the standard and wholesale marketplace; a grasp of the complex nature of insurance as applied to each individual business; and understanding of regulatory requirements, Trimble says.

“Independent agents and small business have a long history of doing business with each other,” says Woodward at Travelers. “Agents offer ‘concierge services’ that are critically important with for small businesses, and bring years of experience; they have seen it all, every type of claim. Small businesses need that expertise and understanding of problems before they happen.”

There are big benefits for agents, too: a portfolio of smaller risks lessens the notion of only working with one or a handful of larger accounts, says Trimble. Smaller businesses are also less subject to market volatility, and their need to use an agent for risk management functions adds to the strength of the relationship. [ A WIN-WIN-WIN SCENARIO

Knowing your client’s business is essential for any agent, but it’s especially resonant for those who want to specialize in start-up businesses, because in many cases you’ll be acting as that business’ risk manager, disaster planner and main mitigation advisor, Ware says. “Know your risks and coverages,” he advises.]
It’s also important to protect yourself. “Get it in writing if they choose not to buy something you’re recommending,” adds Ware. “Retail agents must understand their business and act as their consultant, but if they choose not to buy what you recommend, for God’s sake, get it signed off on.”

TINA FEY FACES $79K WORKERS' COMP JUDGMENT

 New York Daily News

April 1, 2014 

Television star Tina Fey was hit with a $79,000 judgment by the New York State Workers Compensation Board in court documents posted this week in Manhattan court – but the “Bossypants” author insisted Friday that she’s up to date with her payments to the state, according to the New York Daily News.

Court papers show that the state sent Fey a bill in February indicating that she owed the $79,000 for a period covering Nov. 20, 2012 through Feb. 2, 2014.

Fey’s spokeswoman Cara Tripicchio said the “30 Rock” star “has proper and current insurance covering all employees and at no time has worker's compensation payment lapsed. “The confusion seems to be a result of a clerical error with the NYS WC Board,” she said. “They have been sending notifications to an old address for an accountant that moved offices almost six years ago."

Jack Nordhaus
Other articles by: Jack Nordhaus
Categories: General Information, Selling, Technology
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