Writing Hard-To-Place Risks

Writing Hard-to-Place Risks Starts with a Good Relationship with Your Excess & Surplus Carrier—
and Your Underwriter
By: Michael Miller, Smart Choice® State Director

Most insurance agents can write auto and home policies in their sleep, and many understand commercial insurance like the back of their hands. But sometimes, clients throw us curve balls. They might have had multiple losses that make finding a policy difficult. Others might be in an industry so unusual or risky that standard carriers won’t cover them. In these cases, relationships with excess and surplus (E&S) lines carriers can be the difference between making the sale and turning a potential client away.

A look at what E&S lines carriers can do for you

E&S lines carriers are insurance companies that write policies for unusual or specialty businesses that standard carriers consider too risky. Sometimes, this is due to a history of loss. But more frequently, standard carriers simply do not have the experience writing these businesses to be able to offer a policy that comprehensively and appropriately covers the risk.

Many E&S lines carriers are licensed in a single state but can do business in other states. But they don’t have to be based in the United States. In fact, the largest E&S carrier in the United States is Lloyd’s of London, a British company. At Smart Choice®, we have partnerships with several E&S carriers, including Burns & Wilcox and Willis.

Your relationship with your E&S underwriter

The E&S lines market operates slightly differently from the standard commercial lines market. Usually, you must try to write the policy with one or more standard carriers before shopping the policy on the E&S market. Doing so requires a relationship with an E&S carrier.

It’s important to maintain your working relationships with the E&S carriers you have appointments with. That starts with your E&S carrier underwriter. If you invest a little time in your relationships with your underwriters, it’ll pay off in the long run.

Underwriters are in a tough position. They have to answer to their employers, the carriers, who reward them for writing high volume of policies with “good” risk. But they also need to please their agents, who bring in the business but often make requests that are riskier than their carriers prefer.

To write a good policy, your underwriter has to trust your judgment on the customer’s risk. And since most E&S policies do not have standard clauses regarding binding authority, back dating, and do not give advance notice of changes to policy, it’s important for you to understand how your E&S carrier underwriter operates and stay on top of each customer policy.

If you make it clear to your underwriter that you understand what “good” risk is, the more likely he or she will be willing to work with you on your more complicated policy requests. Give your underwriters the professional courtesy of asking thoughtful questions and submitting a clean request that has all the information they’ll need to feel comfortable writing it. Make your requests complete, clear, and timely.

If you take the time to get to know your underwriters and their carriers, you’ll learn certain carriers will never write particular policies, while others are eager to take on your riskier requests. But you’ll only know this if you invest some time and effort to understand how and why your underwriters write what they do. Take a moment to get to know them better. It’ll pay off for your agency in the long run.

Customers requiring E&S policies may not come through your door every day, but being proficient in writing this type of business can create real opportunities for your agency. You could become the resource for niche industries who can’t be insured through their current agent’s standard carriers. Imagine writing all the car dealerships or pizza delivery businesses in your metro area. What impact could that have on your agency’s profitability over the next five years?

Common Hard-to-Place Risks

  • Engineering Companies
  • General Contractors
  • Implement Dealerships
  • Motorcycle Dealerships
  • Large Habitational Risks
  • Trucking Companies
  • Used Car Lots with Inventory of 30 or Fewer Units
  • Vacant Buildings


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3 Tips for When It’s Time to Move On: Selling Your Insurance Agency

3 Tips For When It’s Time To Move On: Selling Your Insurance Agency
By: Michael Miller, Smart Choice® State Director

You’ve spent your career helping families and businesses mitigate risk and protect their assets and loved ones. You have a full book of business, wonderful staff, and a great office. But not it’s time to move on. What will happen to the insurance agency you’ve worked so hard to build?

Here are three tips that help take the mystery out of selling your insurance agency.

1. Get an Insurance Agency Valuation

You’ve been busy growing your agency and working hard to make it profitable. But do you know what your agency is worth? Determining your agency’s value is the first step in selling it. Take into account the contributions of your producers and other staff, your agency’s location, the quality of the markets you offer, and the diversity of your book. Are your eggs thrown in the baskets of a few big clients, or is your risk spread out across many different accounts?

2. Have a Plan for Selling Your Agency

Planning the sale of your agency starts early, as many as three years before you hope to close the deal. You need to hire the right team to help you through the process, starting with a good business attorney. The first step is to complete the valuation. This gives you time to remedy any issues that arise from it. Then comes the research into potential buyers, negotiations, and closing the deal. All these steps take time. Don’t wait until you’re ready to call it quits to start the process.

3. Know Your Sale Options

Agency owners may choose to sell their agencies to an internal buyer, such as a producer, or an external one. When you sell your agency internally, your buyer may choose to take out a loan to buy the agency outright. This is called a leveraged buyout. Or, you may work out a deal where the buyer pays you incrementally until he or she fully owns the agency. This is called an owner-financed transaction.

Some external sales are roll ups. This happens when another agency absorbs yours into its existing structure. Other times, a buyer purchases your agency outright and moves right in without changing staff or location. On the other end of the spectrum, a book buy occurs when a buyer purchases just your list of customers, not your staff or your physical agency.

Selling your agency can be complicated, so it helps to have a great team on your side. Smart Choice® agency partners have the freedom to sell or transfer their agencies as they see fit, including to family members or agency employees or producers. We’ll even help you sell your agency for free, saving you in business broker fees. Contact us today to discover why a partnership with Smart Choice® is the smart choice


Agency Equity

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Property Casualty 360