Warning from Insurers

Welcome to Risky Business Commercial Insurance with Butler Byers. This is Paul Martin, the business commentator on CKOM. Joining me as always, Colin Rooke, the commercial risk reduction specialist at Butler Byers. And we’re doing this in just complying with all the COVID rules. Colin, you’re at home. I’m at home. We’re not in a studio anywhere. We upgraded our own technology a bit so that we sound more like we’re in the studio, but we’re just doing what the officials ask us to do, stay at home, but proof you can do this stuff remotely and virtually.

We’ve been talking for months now, I guess, about probably three or four key themes in the show, and one of them has been the condition of the insurance market right now. That’s what you and the industry call a hard market, which is one where insurance companies are getting tougher, I guess, aren’t they? They’re harder to deal with. And that means your job as a broker and ultimately the job of the customer is getting more difficult as well. So that’s the theme of today’s show. Maybe any new angles?

Angle is the best way to describe it. Got any new angles on the story right now?

Yeah. Thanks for the intro. Yeah. We’re back to primarily a recording from home due to cases, and I’ve got an eager 11 year old sitting beside me who’s trying to do his schoolwork, but wanted to listen to dad talk. The change in the market and we’ve talked quite a bit about the hard market and it’s not going. And I’m not trying to just repeat what’s already been said, but I do follow industry news. We discuss a lot of that on this show and then try and make it relevant by way of, okay, well, here’s the news, whether good or bad.

What can you do with it, or what can you do about it? What I wanted to talk about today is an article that… Basically it’s kind of a letter to the brokers from the insurers. We’re in a hard market, things are difficult to say the least for both brokers, insurance companies, and certainly our clients. And the message is pretty… It’s pretty loud and clear. They are saying, “Look, you have got to stop trying to save money for your clients by remarketing every account you have and sending it to every single insurance company there is or that you know of.”

And that is very accurate. That’s that is certainly what’s happening today. It’s been happening for probably nine months now, 10 months now, and it’s a knee-jerk reaction to increased prices, right? You say, “Okay. Well, insurance has been bought and sold a certain way for so long and the concern is if I have increased prices, maybe I’ll lose my client because they’re going to be unhappy with that, and they’re going to call another broker.” We’ve talked about tying up the market in the past. Sort of the old trick is block the markets.

If I reach them first, then Paul, you can’t go out and talk to them yourself. And the other issue too is rather than have the discussion around the state of the industry, and quite frankly, your clients and prospects’ role that they’ve had in that, it’s easier to say, “We’ll try and find cheaper pricing, cheaper pricing, cheaper pricing, and we’ll fight tooth and nail.”

Well, I got to tell you, if you’re in an industry where renewal terms are coming in at 40% increases, 50% increases, 60% increases and you spend hours and hours and hours surveying the market and you’re able to turn a 60% increase maybe down to a 58% increase, you’re really not winning that battle. I mean, the savings are minuscule at best. You’ve put a lot of work in, but you’ve also burned dozens and dozens and dozens of insurance companies in the process. I mean, this article basically says a note to the brokers that we are ignoring your submissions.

We know what you’re doing. We know that you are just pushing all this work onto us because you won’t have the tough conversations. We’re not interested in most or any of your accounts. They are getting ignored. And when we do quote them, we’re putting very little effort into it because your problem can’t be our problem. If you can’t have a tough conversation with your client, don’t expect us to be the one doing it for you. A word of caution to brokers, the shotgun approach, the peppering the market approach isn’t working.

Now, it’s not all bad news. The solution that they offer and it’s a solution or an approach that we’ve been using for quite a while, and for me and the reason why I wanted to talk about it on the show is it just validates a lot of the work we’re doing and the sort of the art of storytelling, picking your markets effectively, and approaching only those you know will be interested.

Peppering the market is the term you used that brokers are just… If they don’t like the story they hear from the incumbent, they just paste it out to everybody in sight and say, “Can you beat this?” How dramatic is that? I mean, how are the insurers feeling right now? Are they swamped, or is this just sort of crying wolf that don’t do this stuff?

They are absolutely swamped. I mean, we see numbers that are so spread out, it’s really hard to cite anyone. But I would argue that the average underwriter is seeing more submissions per month than they would in normal times per year. And on our end, it’s very difficult to reach an underwriter. And you think, well, because prices are going up, are they just saying, “Well, we don’t have to impress the brokers to be… We’ll just ignore them.” No, there they are so inundated with requests. We have insurance companies that have…

They’ve had to draw a line in the sand. They’ll say, “Look, anything that crosses our desk needs to be 10,000 or more in premium or we won’t even look at it.” You want to send an office pack, a small office package to a specialty insurer? Just know our quote is $10,000. And if you’re okay with that, we’ll write it. But the thing is you don’t want them to get to that point. I mean, that’s a sad thing. What if that market is very good at a certain class of business and maybe would normally fall in the five, 6,000 premium range, for example?

Now they’re so inundated with everyone’s requests on lines of business that they don’t want to write. They don’t even want to see that. But now, they can’t even write the good risks, the ones that they are capable of writing. We’re now blocking ourselves from finding appropriate homes for our clients. And it gets worse. I mean, there’s a lot of businesses out there that are pretty straightforward, black and white, and they fit into a lot of boxes.

Well, you take that business, and again, you’re peppering it around and you’re annoying all these other underwriters globally, but then… They’re overworked. They’re frustrated. The workload never ends. I mean, they’re trying to take time off for the holidays, just like everyone else, but then you have a nontraditional risk. Some of that’s outside the box. If you look at your workload and you say, “I have 1,500 people that want me to quote their business. I may not get any of them at all.

And now I’ve got this outside the box that’s going to take some creative underwriting, some creative selling, some creative storytelling, I’ve got this in front of me.” You think they’re going to work on that? Not a chance.

It’s just the notion of basically giving you go away quotes because they’re swamped in a lot of cases. They just simply aren’t entertaining it. They’ve got too much on their plates, so they’re simply not going to give it a fair shake. And ultimately, it’s the client, your client, or the small business owner whose kind of left on the outside looking in on this. Colin, you’ve done a good job of painting the picture of the market today, the situation that you’re dealing with.

We got to take a little break. And when we come back, maybe we can talk about how you cope with all of these challenges that we’ve laid out in the first half of the show. You’re listening to Risky Business Commercial Insurance from Butler Byers. Back after this.

Welcome back to Risky Business Commercial Insurance from Butler Byers. Colin Rooke, the commercial risk reduction specialist with Butler Byers, is sitting in with us today, talking about the state of affairs in the market as we wind down towards the end of this calendar year. Colin, you’ve talked to at length really about a very challenging market right now. If you’re the buyer of insurance, I go to a broker such as you and I say, “Represent me in the market,” it’s really tough out there.

I’m finding premiums are going up, if I can even get the attention of somebody who will make me an offer of a premium, nevermind one that I find attractive. There’s got to be ways, though, to cope with this. I mean, what strategies are you deploying or saying to your customers, “This is what we have to do in order to get the attention of those people who are basically just trying to keep their head above water because there’s so much going on.”

Yeah, great question. Inside this article, I mean, it validates what we have been saying on the show for five years. I mean, it says choose your markets. Go to one to three max. Get your story right. Be honest with the underwriter. Tell them what you’re doing. Tell them who else you’ve approached, if any. Explain the risk and explain why you chose that market.

And give them the assurance that if they can come through for you for whatever reason, it might be pricing, might be coverages, might be deductibles, but if they can come through for you, you’ll be placing the business with them. Suddenly you’ve got this diamond in the rough. This account that stands out among 1,500 other clients waiting for a knee-jerk quote. It’s you know what? That’s something to work on. Because even though we’re in a hard market, even though we’ve got COVID-19 to worry about, they still have a job to do.

They still have targets that must be hit. They still have to look at loss ratios. They still are required to write new business. The problem is how do you choose? And it’s something that we’ve done from the start. It’s something that we talk to all of our clients with. We do creative, personal selling. If you want someone to arbitrarily email over a hundred different insurance companies, and I’ll be honest, even as a broker, we don’t have time to go through a hundred quotes either. I mean, that’s just one client.

Now you’ve got 5,000 clients and you’re going to a hundred markets for all of them. The underwriter can’t go through it and give it proper attention. We can. And that’s why we say this company is perfect for you because they like what we do. They like the journey we’re on. We’re going to call them and say, “They’re with this market. We don’t feel it’s a good fit. Here’s the story. Here’s what we’ve done. Can you work with these people? If you do, you’ll get it.”

Sorry. You’ve always talked on the show about you need a plan. You need the story. You have to work with your client to actually craft a story. And that means you got to do some things so that you’ve got something to talk about. That’s the building of the plan thing. Is that a part of the defense mechanism in this marketplace?

Yeah, absolutely. And I’ll use the hospitality industry as an example and I think I’ve done it before. However, the hospitality industry would be the hardest hit, in my opinion, from the insurance broker angle in Canada. You’ve got empty hotels. You’ve got restaurants at a third capacity, the increased costs of takeout services. You name it. And then on top of that, they would be one of the hardest hit when it comes to premium increases.

If you don’t have a three-year plan in place that’s going to show you are going from where you are now to great, it’s only going to get worse. In another article, sort of a plea by the insurance companies to the brokers, it says exactly that, that it’s only going to get worse if we aren’t working together to improve the risk. And if we aren’t having the tough conversations now with hospitality clients to get their head around this thing… There’s some great businesses out there. There’s some great claims, free incident, free accounts.

However, you got to think to yourself, if you’re listening right now, is that story being told? Because the industry thinks it’s doom and gloom. The industry thinks you’re not doing anything. The industry thinks you’re serving way more alcohol than you say you’re going to, and that people are driving home drunk. If we don’t address how are you going to avoid fires, how are you going to avoid liability claims, if we don’t have that knowledge, and they’re saying you’re going to have to tell that story for a long time before it’s even going to change, it’s big trouble.

On the other side of this, basically the insurance companies are doing this for a reason too. You make the point that they’ve got targets to hit. They’ve come through some really awful years. And for them, this is rebuilding the balance sheet and the treasury of their companies as well. So they do need to do business, but it’s not on the terms that it was five years ago.

Absolutely. I mean, it’s really easy to forget that these are businesses themselves that are trying to turn a profit. They need to make money too. And if there isn’t money coming in, they don’t have any money to deploy to pay claims. And that’s what we have to get our head around. To pick on the hospitality again, if you don’t have a claim, great, but you know someone for sure that’s had astronomical claims. They all do. And then you think, okay, what if I took my premium and combined it with the person I know with astronomical claims.

Now, we have no claims, a lot of claims, combine the two, who would have won? I promise you, the insurance company lost. It’s everyone working together to say, if we want prices to decrease, if we want coverages to be broader, if we want more competition, we have to do something. Because right now there is no competition. It’s trying to find someone to take on. And not just hospitality, but certainly if you’re a challenging risk, there is no competition for your business. It’s begging. It’s begging to find a home versus who wants this, who wants their money.

That’s not the outlook today. You can turn it around, but you have to have a reason for them to look at you. You have to have a reason for them to believe.

Colin, you’ve always talked over the years of the step-by-step plans that your organization has built for pretty much any industry. People can get ahold of you. You will walk them through the step-by-step plan. These are the actual steps you need to take in order to make yourself now attractive to the insurance companies, as opposed to a pariah that they don’t even want to deal with, because you’re one of a bazillion that they’re looking at and you don’t stand out.

Absolutely. And again, we start with a document. We record all that stuff. We make sure that our clients are aware of the story we are telling, why we are telling it, and what we’re doing to help. And you can see for yourselves. This is what we’re going to say. We’re not just going to pepper the industry. And again, it’s not possible for us to tell the story to a hundred different markets for 4,000, 5,000 different clients. We’ve got to be selective.

We have to say, “We want you to take this. Here is all the background work. Here’s what we’ve done. Here’s what they’ve done, and here’s why it’s a great risk, or it’s on its way to great.”

And then that becomes your job is crafting the story and how you make your client no longer look like just a single snowflake in a blizzard.

Absolutely.

Colin, we’ve run out of time. As always, very insightful, very instructive. I know we’re headed into the holiday season and all of that, and we should probably be more upbeat in our conversations, but this is a reality that business owners have to deal with. Sometimes you do have to have the straight conversation. Thanks for being so upfront on this one. You’ve been listening to Colin Rooke, the commercial risk reduction specialist with Butler Byers. This is Risky Business. Join us again next time.