Entries Tagged as 'Industry Info.'


2009 – A Market Change for Property Insurance

The days of expected low property and casualty rates for insureds is likely to come to an end.  As an agent, you’re on the front lines and this daily reminder is vivid yet the reasons are many.

Pick any news outlet and just hit the headlines to list your culprits for likely rising premiums this year.  The crashing housing market dove-tailed with the sub-prime lending which ushered over-rated collateralized-backed securities into almost every bank’s balance sheet is a big one.  How about Hurricane Ike?  We do know that re-insurers were hit hard by this storm.  Or just plain old disappointing ROI for insurance companies.  By the end of the third quarter last year, the best data available, investment gains totaled less than 50% than in 2007 according to the New York based Insurance Information Institute (III).  The only asset class to weather this last market free-fall is cash.  Yes, even money market accounts saw record redemptions.

But these headlines don’t tell the entire story.  Even with premiums possibly climbing this year, premium revenue is just not there.  Contributing factors to this are falling gross receipts, lay-offs, and businesses just closing their doors.  So what does this mean? It means we are entering a new cycle of premium adjustments.  Insurance Information Institute states, when premiums fall below average as they’ve been for the past few years, insurer’s profits decrease precipitously or disappear altogether, thus they can’t underwrite new business.  When the supply of insurance drops, underwriting appetites narrow and premiums accelerate.

Insureds know there are numerous factors affecting their premiums.  So educate your them on all of the dynamics that are affecting their yearly premiums.  Layout the possible landscape for the coming year and let them know you’ll offer them the best package you can put together.  Premiums may rise but from this is the opportunity of a lifetime to make clients for life!

I want to thank the Dallas Business Journal for information relating to this article.  Peace.  -villageChief

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Conversion – One of the Most Feared Words in Insurance

"Seriously", you’re asking, "did you really have to bring up the C-word during a season of cheer and celebration?"  Of course I did.  Because within this monumental task, for any agency, bears the promise of better service to your customers, better reporting for the agency, better accounting records, and the hope for more efficiency for your employees.  But let’s not kid ourselves with the reality that this project demands.  It’s going to take a fully executed plan by your agency like no other.  And communication like most projects is key!  It doesn’t matter what platform you’re coming from or what agency management platform you’re going too, have a plan.  So I’ve taken the liberty to ask an office manager of a large agency in Texas for her perspective on conversion a year after initiation.  

6 Questions to Understand Conversion Better:

Question:  What is the most challenging part of the process?

No doubt it is understanding just what you have purchased and how to use it in daily activities.  If conversion does not go smoothly…. then everything else, daily tasks and strategic office projects, gets pushed back. The day to day use and system efficiency suffers due to clean up from a bad conversion.  Our conversion was bad because client records were transported improperly  from the old system to the new one.

Question:  Would you add more help and hands to the conversion process?  If so how?

The more eyes that look at the process and contribute the better you will be. We implemented a conversion team which represented one point person from each department, life/health, commercial, personal, etc..  Each department uses the system in a different manner.  Get them involved from the time you start prospecting a new system.  We had lunch-and-learn sessions offsite purposely to get them away from the office to focus on how the new system might impact their department.

Question:  How did you include and update the different departments of an agency?

At the beginning we had one-on-one sessions with departments and staff.  Then bi-weekly meetings and monthly learning lunches.  We pulled on-going reports and monitored data entry as needed.  And then we quickly responded to users who had data entry errors.

Question:  How should an agency about to start the conversion process manage their expectations?

Well in our case we were advised that if we were using 30% of the system after one year we would be doing good.  We had much loftier goals.  In the end, they were right on target.  We also expected that by spending more on an extensive system, we would be able to reduce or maintain staff.  We did just the opposite, we added staff after conversion due in large part to a bad conversion.  Temper your expectations due to new terminology and record transfers.

Question:  What are the top 3 pitfalls for converting from one agency platform to another?

1.  Data Converted Properly – Bad data or misplaced data will nulify any accurate reporting.  2.  Terminology – Learn the new platform’s terms compared to the old system, this can be very confusing.  3.  Reporting Functions – Learn how to generate the reports you want with the new system. 

Question:  To do over, how would you approach the process of conversion?

Manual conversion only!  No custom conversions here.  Custom conversion equals nightmares!  The entire process will go smoother if you enter all of the data manually.  I know this sounds like a laborious task because it is.  However, not only will the data be entered correctly; you learn the system up close and personal real quick.

- villageChief

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State of the Industry – Our Soft Insurance Market

One of my favorite Gilligan’s Island episodes was when a man named Lord Beasley Waterford landed on the island of castaways in pursuit of the world’s rarest butterfly, the Pussycat Swallowtail www.youtube.com/watch .  In one scene Lord Waterford is so focused on casting his net on this rare species that he never realizes he was stepping in quicksand.  Lord Waterford misses.  Still fixed on the butterfly’s escape path, he is up to his neck in quicksand.  With the Howells observing nearby, he exclaims, "never mind me, after that butterfly!"

This small, although simple, example often illustrates insurance agents in a soft market.  We can become so focused on what we’ve been doing over the last couple of months or even years that we realize it’s too late to respond to a changing market environment. 

There’s no doubt today’s soft insurance market is defined by slashed insurance premiums, cut commissions, an increase in agency mergers and acquisitions, standard companies entering previously unchartered markets, and smaller number of policies being premium financed.  We can’t say we didn’t see this coming since this market has been softening well before our economic credit, housing, and oil crisises.  Actually, according to www.marketscout.com the P&C insurance industry has been softening since April, 2003.  The chart below from MarketScout depicts the Average P&C Rate Increases over 2003.


It’s interesting to note the percent increase in December ’03 is less than half of what the percentage increase was in January ’03.  Moreover, MarketScout paints a multi-year picture of this trend.  Please follow this link and scroll half way through the page to see the charts of composite market conditions for 2001-2008.  www.marketscout.com/frontend/barometer2.asp


3 Ways Agents Can Grow In a Soft Market – Not only are the top performing insurance agencies surviving slashed premiums, curtailed commissions, and price wars, they’ve made this an opportunity.

  1. Educate your clients – Teach your insureds about the ebb and flow of insurance premiums.  Chances are they probably experience similar forms of business cycles so they may understand.  Maybe even some clients have been with you long enough to have seen their premiums rise and fall.  Now is a good time to reinforce that understanding and your relationship with that client.
  2. Find Other Gaps In Risk – A drop in premiums presents an opportunity for agents to probe their clients for other areas of risk.  Most businesses forecast a budget for expenses including insurance.  So take this opportunity to explore other areas of coverage.  You may uncover more business.
  3. Offer Other Lines of Coverage – In other words, diversify your offerings to your insureds and prospects.  Adding other components of insurance like life/health, key-man insurance, retirement benefits, and health benefits are examples of how agencies can smooth out the fluctuation of the soft P&C insurance market. 

All industries fluctuate over time.  No market trend lasts forever.  Both of these we know.  But the big take-away is to keep an eye on the macro-environment of the market and prepare for the next move.  The below chart (from MarketScout) is the silver lining in this soft market.  You don’t want to sound like Gilligan in the next market trend.  "Geez skipper, I didn’t see that one coming!".  -villageChief



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