Commercial Lines–Open for Business
By: Mark Brandt, Vice President, Commercial Lines, Smart Choice®
Stop me if you’ve heard this one.
Our industry is entangled in an unprecedented hard market, brought on by a perfect storm of aggravating factors: A surge of post-COVID driving after the empty highways of a surreal pandemic, relentless and costly weather events, hyperinflation in both the cost of repairs and injury settlements driven by increased litigation, and reduced capacity of reinsurance. The market responds in kind, with increased premiums, reduced capacity, and stricter underwriting standards. The dynamics of a hard market underscore the importance of resilience and a willingness to diversify, strategic planning, and collaboration between insurers, agents, and insureds.
For agents, especially captives or otherwise personal lines-focused shops, the struggle is real as both home and auto have felt the sting of the hard market. Carriers are laser-focused on profitability at the expense of growth, and in some cases, we’re seeing previously standard business leaking into the E&S space as carriers tighten underwriting guidelines.
The commercial arena has not been immune to the realities of the hard market, but the effects to date have largely been compartmentalized to specific geographies, lines of business, and carriers.
A few carriers have been forced to take some aggressive actions, but there are still standard national carriers in growth mode thanks to being historically disciplined in pricing and underwriting. As some of the more challenging classes of business are pushed out into the marketplace, these carriers are well-positioned to be selective about what risks they entertain and then charge an adequate rate. This is preventing an exodus to the E&S and non-standard space that personal lines is experiencing.
More than that, commercial profitability is generally stable for carriers who have avoided the perils of an auto or property-heavy book mix, and there are some lines which remain very profitable to the point they are in a soft market. Workers Comp is currently highly desired by carriers, who are offering compensation incentives and looking to round out their BOP/GL customers with the additional coverage. This is a huge opportunity for revenue to agencies, both in added commission and increased retention.
You also see carriers pushing to grow with inland marine (builders’ risk, contractors tools & equipment, motor truck cargo), cyber, and trucking/transportation. Smart Choice continues to build out our transportation unit in Smart Start, as we expand our portfolio of markets to help you win business. Offering these non-traditional markets moves us ever closer to being your one-stop shop for any commercial opportunity that might cross your desk.
Diversification into commercial lines is a critical strategy for the success of any agency in today’s marketplace. Prior to the hard market, commoditization of personal lines was the enemy of the Independent Agent, along with the relentless competition from direct carriers.
Remember those days?
Diversification was important then too, just for different reasons. As this seemingly endless hard market drags on, commercial is still a viable option to ride out the storm. We’re open for business!