How to Approach BOPs in an Unchanging Market

The commercial market as a whole spent most of 2015 softening, and many lines of insurance are currently experiencing either flat or negative pricing changes.

But while some of the BOP market will hold steady, other accounts might stray from the rest of the commercial pack, leaning toward slight increases in the coming year.

Michael R. Keane, president, small commercial at The Hanover, expects modest increases for BOP pricing, which he anticipates will “vary by class of business, local markets and underwriting elements,” he says. “On average, good business will continue to be competitively priced.”

“What we foresee, especially for the good accounts, is it’ll be relatively flat,” agrees Dan Gaynor, vice president of commercial lines at The Main Street America Group. “For the accounts that aren’t performing as well, you will see some increases.”

While the industry would probably like to see more significant increases due to consistent rough winters, “I just don’t think you’re going to see it,” Gaynor says. “You do have some new entrants into the market and there’s still a lot of good capital in the industry. And since there’s a lot of capital in reinsurance right now, reinsurance is relatively cheap.”

That helps keep rates down—“typically what you would see is when you’ve had a lot of the weather losses we’ve been having, insurance might increase,” Gaynor points out. “But there’s so much capital right now, you can’t invest anywhere else but go into reinsurance. I think you’re going to see the market remain stable.”

In order to effectively service your BOP clients that might be experiencing slight rate increases, “take a close look at your carriers’ appetites and products,” Keane says. “We see many agents placing small commercial business with upwards of 30 carriers, which can make processing the business far less effective for an agency.”

Lynn LaGram, assistant vice president of small commercial product at The Hartford, encourages agents to continue to focus on small business owners. “There tend to be a lot of misperceptions about small businesses and the small business segment—that small business owners are all the same, or that it can be difficult to serve them efficiently,” she says.

But in reality, The Hartford finds that most small business owners feel their business is very unique, LaGram says. “Even two of the same type of business on the same city block will tell you they’re different, their needs are different, and they want a solution that’s tailored to them,” she explains. “Really understanding their needs is important, and having small business owners feel that their needs have been met is important.”

Another important characteristic to remember: “Small business owners buy heavily based on trust and their peer networks,” LaGram points out. “Many agents already do this, but it’s beneficial to build that clientele within a network of small business owners in a community to help expand their footprint.”

What coverages is a traditional BOP likely to encompass moving forward? Keep an eye on and upcoming issues of the Markets Pulse e-newsletter to find out.

Jacquelyn Connelly is IA senior editor.