A FORMULA FOR PLACING ACCOUNTS

Rough Notes, Jan 2004 by Moore, Cleva

Each risk must have an individualized submission strategy

It takes more than a complete, accurate, and timely application to successfully place an account. Yes, your submissions still need to meet these generic criteria. This is not enough, however, to get the types of responses that will allow you the opportunity to write and/or renew insurance for your clients on a consistent basis.

You must take into account the type of risk you are submitting and the risk appetite of the underwriter. Some companies want only the preferred risks with good loss history, while other companies go for the higher risks, but offset these with higher premiums. You must look at the different types of risks individually and follow a submission strategy for each one. For simplicity, I have categorized accounts in three different ways with a formula for successful submission of each one.

Mainstream accounts

These are the "lower risk" accounts in your (and your competitor's) agency. These accounts have newer, well-maintained property, low to moderate liability exposures, limited auto exposure, nonhazardous workers compensation classifications, stable carrier history and verifiable claims data with no more than a couple of claims in the past five years. Oftentimes, several agents are competing for the chance to provide coverage for this client. You know who these people are in your market area!

Submissions for these types of accounts are easier with wide availability of information demonstrating that they are accounts with lower than average risk. You cannot send too much information to the underwriter. If there is a Web site, be sure to review it carefully and then provide the address with your submission so the underwriter can find it without spending unnecessary time searching. This also assures you they will be looking at the same site you reviewed. Photos, building valuations, and currently valued company loss runs for no less than three years should be included.

There is high demand for this type of account, so one key to success is providing complete information, including an account narrative. It should include, as a minimum, information regarding the history of the company to be insured, current trends in this industry and, if verifiable, how this client is either a leader or quick follower. This is a good indicator of how well they will position themselves in their industry. In addition, you should include information letting your underwriter know why you think you can get the order to issue coverage based on their proposal. Your underwriter has to understand that a fair and reasonable price is important, because many companies may be competing for this type of account.

Another key element is timing. The company will want to do an inspection of many of these risks prior to offering its quote, so it is important to have the information presented within your underwriter's parameters. Give the underwriter the lead time that he or she needs. For example, if your underwriter needs 60 days' lead time, provide it at least 65 days ahead of time.

Average risk accounts in "tough" classes

There are quality accounts that require more careful underwriting because of the class of business or risk of loss (in the eye of the underwriter). These accounts are generally risks where there is evidence of pride in ownership. There will be "hands-on" management and a stable workforce. These accounts include older (but well-maintained) property, more hazardous liability, and auto and/or workers compensation exposures. These accounts should have had no more than a couple of claims in the past three to five years (for the smaller accounts). Larger accounts may have more claims; but with a high deductible or self-insured retention to take care of the frequency, the loss history may still be reasonable.

Submissions for this type of risk need a little more direction. Everything mentioned in the mainstream account submission must also be included with this submission. In addition, you must include data validating how this client has differentiated itself from its peers.

For example, if property is older, documentation of updates may be needed, including names of contractors who completed the work. If there is concern with the liability classification, samples of the product and/or reproductions of quality control data, including standard operating procedures for each process, will improve your position with underwriting and/or engineering. When workers compensation is the area of concern, copies of safety manuals, records of safety meetings (including attendees and outline of meeting materials), and information regarding safety incentives for employees can add to the underwriter's understanding regarding what the client is already doing to make the firm a more acceptable risk.

Impaired accounts

These generally are accounts that have either been cancelled or nonrenewed, or have experienced significant premium increases (relative to other types of risks). Additionally, these accounts may be classes of business where few underwriters compete. These accounts offer significant opportunity for agencies with available markets. Frankly, these insureds "need us."