Reject ‘As Is’ Renewals to Boost Organic Growth

By: williamjones
April 1, 2015

By: David Hulcher

Knowledge is power—especially when it comes to an agency’s organic growth.

Within every agency’s customer base lies a labyrinth of coverage limitations and policy exclusions—a potential roadmap to increased revenue. To grow organically, it’s important to recognize that customer needs change over time and that “renewing as is” isn’t the only path to success.

Take advantage of organic growth opportunities by becoming proficient at policy and exposure analysis. Documenting offered coverages, whether accepted or not, will provide a foundation for defending potential E&O claims down the road.

Here are some key considerations for growing organically while reducing E&O exposure:

Product knowledge: The deeper your product knowledge, the better prepared you are to take advantage of opportunities where organic growth exists. Investing in quality, technical coverage training opportunities pays for itself over time.

Policy review: In reality, many agencies don’t take the time to review policies ordered by the customer. How can you tell if customer exposures are actually covered without reviewing policies? Word of caution: Don’t get backlogged on policy delivery. Customers need to review their policies as well.

Policy exclusions: A policy exclusion could be an opportunity to sell coverage either through a policy endorsement or a stand-alone policy. The Big ‘I’ Virtual Risk Consultant (independentagent.com/vrc), exclusively available to members, provides valuable direction on ISO policy endorsements and their uses.

Customer evolution: People and businesses change over time—a fact ripe with opportunity for organic growth. Think through the evolution of the customer insurance life cycle and new exposures, offering coverage accordingly. Your customer might not call you when his or her exposure changes.

Coverage checklist: Whether you’re a new producer or a seasoned agency owner, using a coverage checklist will ensure you’re offering expanded coverage options. This helps you get the most out of every customer you work with.

Customer decisions: Don’t fall into the trap of only offering the coverages customers thinks they need. You may not have a legal duty to offer additional coverages, but if you are trying to grow, it certainly makes sense. Even if the customer doesn’t want to pay for the additional coverages, at least you’ll have documented that you offered it in the event of an uncovered claim in the future.

Understanding a customer’s coverage needs and the coverage their policies afford can open the door to organic growth opportunities—while slamming it on potential E&O claims.

David Hulcher is assistant vice president of agency professional liability risk management for the Big “I” Professional Liability Program.

Coverage Areas to Consider

Flood and earthquake coverage: Natural catastrophes are great exposers of coverage deficiencies in insurance programs of customers. Offering flood and earthquake coverage to both personal and commercial lines customers is low-hanging fruit. Document those files if clients reject coverage.

Business income/off-premises power failure/dependent property: It starts with offering flood and earthquake coverage to be sure it is an insured cause of loss, but these time-element coverages can round out protection and provide premium growth opportunities. These coverages become even more important as businesses grow.

Umbrella: Whether it’s an established business or a family with teenagers, it never hurts to offer customers an umbrella. The additional limits along with the possibility of expanded coverage terms are very E&O-friendly for an agency. Be sure to verify policies meet underlying coverage limit requirements and clients report claims in a timely manner.

Defense inside or outside limits: Talk with customers that have coverage with defense inside the limits about what this really means when they take into account the average cost of defense. When it comes to some professional liability lines, defense costs can make up about 33 cents of every dollar of ultimate loss. For comparison, $3 million in coverage with defense inside the limits may equal $2 million with defense outside the limits. If defense is inside the limits, make a case for increased limits with customers.

Cyber liability coverage: If customers don’t understand the importance of cyber coverage, they’ve probably been living under a rock. First-party damages from data breach notification requirements alone make this a critical coverage. Just because a customer doesn’t think they need it shouldn’t stop your agency from offering it. (And if you’re feeling uncomfortable because your agency hasn’t purchased a stand-alone policy for itself, call your Big “I” state association for help.)

Environmental impairment liability insurance: Without careful review, pollution exclusions can potentially completely limit coverage for a customer’s most prominent exposure. The expanding definition of “pollutants” may open up the need for and the opportunity to sell environmental impairment coverage. From an agency perspective, this coverage may be technically challenging to understand, so work closely with your underwriter or broker. —D.H.