Business Challenges of a Hardening Market

In an effort to keep our business partners informed, we at Socius would like to educate our partners on some challenging trends we are seeing in relation to the hardening Management Liability (ML) marketplace in California.

As always, if you have any questions or concerns, don’t hesitate to reach out.

Increased Notice of Non-Renewals. Nearly all of the ML carriers offering coverage on an admitted basis are sending conditional non-renewal notices, as required by the DOI, as they may make major changes upon renewal. We are also seeing carriers actually non-renewing some accounts due to industry, losses, and/or location.

Carriers Are Saying No. Carriers will walk away from renewals if they cannot get the terms/condition that they want. There is not as much room to negotiate quoted terms as in previous years.

Going to Voicemail. It is harder to get in contact with underwriters and obtain quotes. Due to the hardening ML market, more marketing of renewals by brokers is happening to justify the increased premiums, retentions, etc. resulting in underwriters being inundated with new business submissions. Incumbent underwriters are not releasing renewal terms until closer to the renewal dates and non-incumbent carriers are hesitant to quote new business unless they feel there is a good chance they will write the account.

Nothing is Easy. Extensions are not easy. While they were simple requests in the past, including policy period extensions, increased limits, and other changes now need to be negotiated rather than just simply requested.

The Waiting Room. Underwriters are asking more questions before offering indications/quotes. Even on renewals, incumbent carriers are asking more questions as line underwriters are being asked more questions by their managers. More accounts need to be reviewed by underwriting managers, which leads to longer waiting times to receive quotes.

It’s All in the Details. Carriers will not bind without (some) subjectivities. Carriers are becoming more strict in having subjectivities submitted prior to binding. Sometimes we can negotiate binding subject to some subjectivities, sometimes we can’t.

Every Account is Unique. It’s becoming more difficult to compare apples to apples. Due to the hardening ML marketplace, carriers are not quoting similar terms on the same account. Different carriers may quote different retentions, different premiums and/or different coverage (ie: no wage and hour coverage, different hammer clauses, etc) making it difficult to compare options.

Lower Commission Levels. We expect this to happen as the hardening cycle progresses.

Going Non-Admitted. Some carriers are moving from admitted to non-admitted paper on renewal to give them the flexibility to make any changes they want to premium, retentions and coverage outside of DOI requirements for admitted carriers.

Losses: It’s All in the Details. More carriers are asking for current carrier loss runs prior to quoting. Unfortunately, due to privacy laws, carriers’ loss runs have fewer and fewer details of reported claims, making it difficult for underwriters to get a clear picture of the insured’s loss history. More and more we are being asked for the insured to provide claim narratives (typically on accounts with claim frequency and/or severity) because underwriters are not getting what they need from the carrier provided loss runs to determine the insured’s accurate loss history.

The Warning Light is On. We must prepare clients early and often. Our experience is that preparing clients early and often makes the delivering of these hardening market quotes easier.

Need More Help? Do you need more information to educate your clients? At Socius—we have plenty of articles and statistical info about D&O and EPL exposures and losses to help you explain the hardening management liability marketplace to your clients.

Please don’t hesitate to contact us with any questions. We invite you to like us on Facebook, follow us on Twitter, and connect with us on LinkedIn.

Paul Lefcourt
Management Liability Practice Leader
plefcourt@sociusinsurance.com