Navigating the Hard Insurance Market: A Path for Agents to Thrive
Gone are the days of low insurance premiums, extensive coverages, relaxed underwriting guidelines, and increased capacities. Since 2019, due in part to the normal cyclical nature of the industry, our market has seen an increase in premiums, more strict underwriting guidelines, and reduced carrier capacity.
A variety of factors have played a role in our current hard market, starting with insurance carriers’ books becoming unprofitable & unsustainable. The Covid-19 Pandemic has prolonged this pain, and along with stubborn inflation and resulting rate hikes with a risk of recession, it may seem like there is no end in sight.
How can Agents Combat This?
While all insurance agents are feeling this pain – captive agents may be feeling it more intensely and are losing policies to independents.
Due to the freedom to seek out additional markets, independent agents have an innate advantage - one that includes utilizing the growing E&S marketspace.
Per S&P Global, excess & surplus premiums increased for the fourth straight year in 2022, rising 20% to $75.50 Billion from $62.90 billion in 2021. This trend actually started prior to the last two years, however, and in fact, the trend has aligned closely with the increase of the hard market over the past four years.
Smart Choice’s specialty line division - Express Markets - has followed this trend as well, and the growth of premium shown in the chart above has provided Smart Choice agency partners an opportunity to combat the hard market with an array of available carrier partners. The program is providing agents a unique opportunity to grow their agency and have solutions for all their clients, even in the midst of a hard market.
Since Express Market’s inception, a driving growth factor for David Wilson, Vice President of Specialty Markets for Smart Choice, was to diversify and partner with more carriers to add additional distribution points in agencies. Having significant experience in the industry, as both a former agent and national, major carrier executive, Wilson long ago anticipated the current market situation, and understood the crucial role excess and surplus lines carriers would play.
This led him to increase the number of new company partnerships in the program by nearly 30 partners in the last five years, resulting in 127% growth in written premium through Express Markets since 2018.
Where has this growth in premium come from?
The carrier alignment within Express Markets can essentially be broken down into five categories: Wholesale Markets, Property & Home, Non-Standard Auto, Artisan Contractors, and Specialty/Niche. Each area has proven to be an important pillar of support to Smart Choice agencies since the hard market initially started.
Wholesale Markets
Wholesale markets, such as Burns & Wilcox, CRC Group, and RPS have accounted for an incredible $327 Million in written premium. With hundreds of available markets, both admitted & non-admitted, wholesale partners provide a fantastic opportunity for independent agents to find a home for a risk that they would generally not be able to with a standard carrier.
Property & Home
Property & home has suffered the most from the ongoing market troubles. In fact, according to the American Property & Casualty Insurance Association, this may be the hardest market for property insurance in a generation.
Increases in claims frequency and severity have played a major role in the market conditions we are witnessing today, with current US inflation dramatically impacting the cost of replacement materials, and reinsurers beginning to pull back (claimsjournal).
With these difficulties, adding alternative homeowner carrier partners became a main objective for Wilson and the Express Markets vertical.
Over the course of five years, Express Markets has partnered with several highly regarded and financially sound property carriers including Heritage, Orchid, American Modern, Tower Hill Specialty and Aegis General Insurance.
Partnerships with these carriers has given Smart Choice agents an opportunity to write coastal and inland property in a market where they otherwise would not be able to, and home premiums have risen to an impressive $50.5 Million through Express Markets.
Non-Standard Auto
The non-standard auto market has also seen tremendous growth, with some studies estimating that non-standard auto insurance coverage makes up to 40% of the auto insurance market (Forbes).
This trend is not likely to slow down with the dramatic rise in vehicle costs and vehicle repairs, and the plethora of factors that can send clients down the non-standard route including poor credit history, foreign driver’s licenses, minimum limits of liability, speeding tickets/violations, and more. Although customers may not be pleased with being considered non-standard, this segment of the industry provides insurance agents with a whole pool of clientele who need coverage.
Following the trend of non-standard auto insurance growth, Express Markets partnered with several highly regarded non-standard auto insurance carriers including National General who was recently purchased by Allstate, and Gainsco, who was recently acquired by State Farm. Express Markets has also expanded relationships with Kemper Auto, The General and more recently with Embark MGA.
This non-standard auto insurance segment accounts for $87 Million in written premium through Express Markets.
Artisan Contractors Insurance
Personal lines insurance has not been the only segment of the industry that has been affected by the hard market. Agencies are also having difficulties finding solutions in the artisan contractor market space, due to a variety of factors and risk characteristics that go beyond the hard market. Risks within this market space often fall out of the standard insurance markets due to their high risk nature. To combat this, Express Markets has partnered with several highly regarded carrier partners that offer solutions for these types of risks. Carrier partners like BTIS, ISC, Pathpoint, and Tokio Marine offer cutting edge platforms that make quoting and issuing policies simple. Express Markets’ partnership with Tapco has also stood firm and flourished due to Tapco’s call, quote, bind system.
Through Artisan Contactor carriers, Express Markets has over $50 Million in written premium.
Specialty / Niche
The last five years have also seen a rise in new types of coverage needs and risks due to changes in legislation, laws and more. Outside of Wholesale, Property & Home, Non-Standard Auto, & Artisan Contractors, Express Markets also offers wide ranging specialty/niche markets that cover anything from cannabis industries and cyber, to professional bonds and flood.
Through specialty markets like Attune, CannGen, Hagerty, and Propeller Bonds, Express Markets accounts for $20 Million in written premium.
With carriers changing policy structures, tightening guidelines, and the slow economic recovery and reset happening with standard carriers, E&S companies are poised to continue increasing market share. E&S and Specialty carriers have invested millions in technology to make these products and coverages increasingly efficient, and for the near future – at least – look to be an enormous source of relief for agents and clients.