I think agents and companies are in line where they both understand the need to adequately compensate the agents. In many instances the disconnect occurs with declining premiums and the desire for higher commissions. It’s a double whammy to the companies where not only are their premiums dropping due to a competitive environment, but the net premiums are dropping even more due to higher commissions and profit sharing. This ultimately will lead to bad results requiring a retrenchment, possibly severe, down the road. Just don’t know when. AIG seems to be going through that retrenchment now. Others soon to follow.
Dave, you are probably right. The good news is that all the companies I represent express optimism about the near future now that the election is over and we have the right leader coming in. The last 8 years have been challenging to say the least.
Echoing the previous comments of Dave, the competition is fierce on the carrier side but also on the agency side. You have some small business going direct to carriers now and the big boys like Marsh, AON, Willis, Brown & Brown as well as all the big bank brokers are buying up agencies like candy and strong arming larger clients to go with them for their expertise and ability to access most markets for the best coverages at the cheapest prices. This is squeezing the independent agent to the point that they must market business annually or risk getting beat by another agent. Consequently their income decreases as premiums decrease too which is why they want higher commission. Until excess capital gets washed out of the reinsurance/carrier side and options for agents on who will write their business start drying up, we will continue to see this problem.
I wish agency compensation would include loss sharing on an account level basis so an agent that has bad business suddenly is having to use his/her commission dollars to help pay part of a claim. This would encourage agents not to take troubled accounts and therefore prices would start increasing on the tougher business. It doesn’t solve the overall low pricing issues for the market but at least the marginal and poor accounts would start trending upward. Right now the savy agent is going after the crap business because those accounts can get rate which means a bigger premium to base their 15 and 20% commissions off of. I actually had an agent tell me to my face that they go after accounts already on fire “because that is where the money is”. There is no incentive for agents to write good business today.
UW4, you did ok for one paragraph. Most savvy agents I know including my agency do not pursue crap business. Troubled accounts are placed in excess/surplus lines companies because the standards will not take them. Why would an agent risk ruining their loss ratio with a Standard market assuming they could even place an account with a Standard? If a Standard market were writing crap business, what does that say about their Underwriters? Underwriters have been known to get fired for doing things like that.
Wish that was true but for me in the Inland Marine space, all we see is substandard business these days. By the way, substandard doesn’t have to mean just high hazard. Business that would be good business if priced and underwritten properly can also be substandard in this market. In the IM arena, almost all of the “good business” has been gobbled up by package underwriters whose capacity for IM schedules have increased dramatically over the past 5 years. Even if it exceeds what the package underwriter can hold, it still stays with the carrier’s IM department if the package is writing the other lines. Monoline IM markets have been absolutely decimated by this because the only things that get marketed to us today are high hazard large frame builders risks, coastal builders risks, high hazard logging risks, under priced equipment risks, MTC w/ auto PD, equip. schedules heavy with cranes as well as under priced, outrageous amounts of flood coverage being offered in flood zones, etc.
Let’s not forget that if you dare to ask any underwriting questions the agent moves on to another market who simply asks what price they need. I just saw a very well known admitted market quote a .36 rate on a builders risk on the Gulf Coast with $10M flood, full wind at 2% deductible on admitted paper and my agent expects me to compete because “other standard markets are quoting”!!! This has left most IM underwriters with two options:
1. Write whatever you can find within your authority and company appetite (or even outside of it if necessary and hope you don’t get caught) so you can push your eventual canning down the road OR
2. Underwrite like you are supposed to and ask questions. You’ll lose the opportunity in most cases and even if you quote, likely the market will undercut your price by 50%. You won’t write much and that means you have about a year before you are cut.
Most underwriters are choosing the first option to save their own necks in the short term and then hope that before their book implodes they can find another carrier that will give them a promotion and a raise because of all that new business they wrote while leaving behind a steaming pile of you know what for their old company to clean up.
There is stagnation in the small agent side of P&C where commission percentage has decreased and difficulty in getting even good business written is met with a sense of indignation. The proof of favoritism is when a piece of business is submitted and rejected yet later quoted by the same carrier for one of the big brokers. This problem has risen sharply recently as large agencies come in and swallow, buyout, the small competitor agents. One thing that saves us is being coveted by the Hispanic Spanish speaking clientele who will never do business with large affluent brokers with opulent offices..so out of touch with this market segment. Hiring Spanish speaking agents in high end attire driving BMW’s and Mercedes just sends them running toward us..thank you!
jestr, you are correct on this. I am not a small agent, but not a multi location giant agency either. I have seen company treatment of large agents a lot different than they treat us. The risk I submitted was rejected by the carrier as not in their appetite guide and then find out later they wrote it for the larger multi location agent because they had millions on the books. The marketing agent and the underwriter denied they played favorites until I sent them a copy of the Dec page I received from the customer showing they wrote it. They had egg all over their face. Needless to say, I don’t place much business with them and I have carriers that do the right thing for us.
Agent, I want to believe your story but am not sure I can. If it’s true, name the carrier. I have never seen that happen. Were there 2 different underwriters at different locations who do not ever speak involved? C’mon, be authentic this time. How much later did they write it? Did their appetite change? What are the details? The world isn’t always against YOU.
Planet, I really don’t care whether you believe me or not. It happened and I didn’t make it up. Same underwriting office, different underwriter, same effective date. Ok for the large agent, not so much for us. Apparently, a different message for one underwriter than the other. The big, multi office agents do get the favorable treatment because of their volume with the carrier.
The world isn’t always against me and I do very well. In this instance, the carrier messed over me. So what. I have other markets that don’t do this.
I believe you. The fact there were 2 underwriters makes sense. They don’t always talk nor share the same discipline.
January 5, 2017 at 1:08 pm
Captain Planet says:
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0
If I were you, I’d put their paper in the bottom drawer.
January 5, 2017 at 3:39 pm
Agent says:
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1
1
Planet, good for you for finally believing me on any topic. Judging from several of your recent posts, I thought you had gone off the deep end. What does it say about management that doesn’t inform all underwriters to respond the same way to any agent that represents them on a submission? I nearly blew a gasket when I saw that policy they wrote for the other agent after we had been summarily dismissed to write it with them.
January 5, 2017 at 4:47 pm
Captain Planet says:
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Yeah, I’d be done with them unless they were my only last option. Not a team I’d want to partner with and it is a partnership.
January 6, 2017 at 3:42 pm
FFA says:
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7
0
I find that my acceptance rate depends largely on my loss ratio.
My lead carrier I had a 6.7 LR and all year long, they have been yes yes yes. Two years back, I ran a 140% LR with them and it was hard to get a UW to accept anything from me unless it was 5 years clean.
im sure you can guess why I am at 6.7% this year….
January 9, 2017 at 2:01 pm
UW Mgr says:
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As a commercial underwriting manager for one of the top 3 carriers, I can tell you that you are partially correct. It all revolves around the law of large numbers. A profitable, large agency with good frontline underwriting practices and proven loyalty will often get an exception that a smaller, less “partnered” agent won’t. The larger agency’s loss ratio can absorb it, the smaller agent with mediocre loss ratios cannot. Hence they are more likely to be declined. May seem unfair but that’s just how it works, I’m afraid. That’s not inconsistent underwriting; it’s good business. Carriers know who the loyal agents are vs. those who always submit borderline nonstandard business. It’s an easy guess which of the two will get the exception.
UW in disquise, If any agency has a good loss ratio and profitable, they shouldn’t get a declination on a risk while approving the risk for the larger agency. By the way, I don’t submit borderline substandard business to Standard Market carriers. Those go to excess/surplus lines. Thank you for confirming to me that the large multi location agents get preferential treatment. They denied it in strong terms, but it was there in black and white.
January 9, 2017 at 1:50 pm
KentU says:
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3
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It could be that you know more about the risk or at least told the underwriter about issues with the risk that the other agency did not. Example: I recently declined to rewrite a customer that left my agency about eight years ago – I was not unhappy to see them take their business elsewhere. Another agent (small and rather new) placed this same customer with the same carrier that they asked for me to write them with about three days after I declined. If that other agent had told the underwriter everything that I knew about the risk I feel certain the carrier would have declined to write it. The sad thing is that I called the other agent, shared with him what I knew about the risk and he wrote them anyway. I get performance bonuses from that carrier and the other agents does not – you would think that he would learn from my experience of 37 years vs his experience of about 5 years.
Kent, carriers accepting risks without proper info and Loss Runs are not doing their job. Part of the fault is in the carrier systems with their cookie cutter approach.
Of course carriers play favorites! Wouldn’t you? Which agent are you more likely to make an exception for, the big one with a profitable book that can absorb the higher risk, or the small, unprofitable one whose every submission seems to be borderline nonstandard? Underwriters know which agents are loyal and which ones sell solely on price and submit crap. It is simply good business to grant one the exception and deny the other, unfair as that may seem.
Forgive me, but you don’t sound like much of a UW Manager. How do you have time to blog on this forum? Doesn’t your imcome depend on how much business you are writing for the company?
My experience has shown that bad risks also tend to be service problems. I may lose commission by not going after the bad risk but, in the time that I didn’t lose I can solicit and write good risks that are not time consuming service problems.
January 5, 2017 at 1:34 pm
Captain Planet says:
Like or Dislike:
1
1
Drago! Drago! Drago! I love Mother Russia with the collective hearts of all of my conservative comrades!
Multiple Personality disorder can be a serious affliction. In Planet’s case, I think it may be the weed that has turned his brain into mush.
By the way, on your comment about Loss Ratio’s, we have companies that we have an excellent Loss Ratio who give a lot of no’s. It seems that it is tied to their overall loss ratio among all their agents. I made a lot of contingency with one carrier that we didn’t do a lot of growing with because we had a profitable book with them. They don’t seem to be concerned with low growth and don’t come out with much to help the agents write new business. Perhaps that will change with the new President and business makes a good recovery. Nice to see all those new jobs being created and Trump will not be inaugurated for two more weeks. Obama is the lamest of ducks and is just trying to stir up trouble every day. What a loser for a President.
I think agents and companies are in line where they both understand the need to adequately compensate the agents. In many instances the disconnect occurs with declining premiums and the desire for higher commissions. It’s a double whammy to the companies where not only are their premiums dropping due to a competitive environment, but the net premiums are dropping even more due to higher commissions and profit sharing. This ultimately will lead to bad results requiring a retrenchment, possibly severe, down the road. Just don’t know when. AIG seems to be going through that retrenchment now. Others soon to follow.
Dave, you are probably right. The good news is that all the companies I represent express optimism about the near future now that the election is over and we have the right leader coming in. The last 8 years have been challenging to say the least.
https://www.youtube.com/watch?v=ANs-jVko8u4
Declining Premiums??? Did you move out of IL?
Echoing the previous comments of Dave, the competition is fierce on the carrier side but also on the agency side. You have some small business going direct to carriers now and the big boys like Marsh, AON, Willis, Brown & Brown as well as all the big bank brokers are buying up agencies like candy and strong arming larger clients to go with them for their expertise and ability to access most markets for the best coverages at the cheapest prices. This is squeezing the independent agent to the point that they must market business annually or risk getting beat by another agent. Consequently their income decreases as premiums decrease too which is why they want higher commission. Until excess capital gets washed out of the reinsurance/carrier side and options for agents on who will write their business start drying up, we will continue to see this problem.
I wish agency compensation would include loss sharing on an account level basis so an agent that has bad business suddenly is having to use his/her commission dollars to help pay part of a claim. This would encourage agents not to take troubled accounts and therefore prices would start increasing on the tougher business. It doesn’t solve the overall low pricing issues for the market but at least the marginal and poor accounts would start trending upward. Right now the savy agent is going after the crap business because those accounts can get rate which means a bigger premium to base their 15 and 20% commissions off of. I actually had an agent tell me to my face that they go after accounts already on fire “because that is where the money is”. There is no incentive for agents to write good business today.
UW4, you did ok for one paragraph. Most savvy agents I know including my agency do not pursue crap business. Troubled accounts are placed in excess/surplus lines companies because the standards will not take them. Why would an agent risk ruining their loss ratio with a Standard market assuming they could even place an account with a Standard? If a Standard market were writing crap business, what does that say about their Underwriters? Underwriters have been known to get fired for doing things like that.
Agent,
Wish that was true but for me in the Inland Marine space, all we see is substandard business these days. By the way, substandard doesn’t have to mean just high hazard. Business that would be good business if priced and underwritten properly can also be substandard in this market. In the IM arena, almost all of the “good business” has been gobbled up by package underwriters whose capacity for IM schedules have increased dramatically over the past 5 years. Even if it exceeds what the package underwriter can hold, it still stays with the carrier’s IM department if the package is writing the other lines. Monoline IM markets have been absolutely decimated by this because the only things that get marketed to us today are high hazard large frame builders risks, coastal builders risks, high hazard logging risks, under priced equipment risks, MTC w/ auto PD, equip. schedules heavy with cranes as well as under priced, outrageous amounts of flood coverage being offered in flood zones, etc.
Let’s not forget that if you dare to ask any underwriting questions the agent moves on to another market who simply asks what price they need. I just saw a very well known admitted market quote a .36 rate on a builders risk on the Gulf Coast with $10M flood, full wind at 2% deductible on admitted paper and my agent expects me to compete because “other standard markets are quoting”!!! This has left most IM underwriters with two options:
1. Write whatever you can find within your authority and company appetite (or even outside of it if necessary and hope you don’t get caught) so you can push your eventual canning down the road OR
2. Underwrite like you are supposed to and ask questions. You’ll lose the opportunity in most cases and even if you quote, likely the market will undercut your price by 50%. You won’t write much and that means you have about a year before you are cut.
Most underwriters are choosing the first option to save their own necks in the short term and then hope that before their book implodes they can find another carrier that will give them a promotion and a raise because of all that new business they wrote while leaving behind a steaming pile of you know what for their old company to clean up.
There is stagnation in the small agent side of P&C where commission percentage has decreased and difficulty in getting even good business written is met with a sense of indignation. The proof of favoritism is when a piece of business is submitted and rejected yet later quoted by the same carrier for one of the big brokers. This problem has risen sharply recently as large agencies come in and swallow, buyout, the small competitor agents. One thing that saves us is being coveted by the Hispanic Spanish speaking clientele who will never do business with large affluent brokers with opulent offices..so out of touch with this market segment. Hiring Spanish speaking agents in high end attire driving BMW’s and Mercedes just sends them running toward us..thank you!
jestr, you are correct on this. I am not a small agent, but not a multi location giant agency either. I have seen company treatment of large agents a lot different than they treat us. The risk I submitted was rejected by the carrier as not in their appetite guide and then find out later they wrote it for the larger multi location agent because they had millions on the books. The marketing agent and the underwriter denied they played favorites until I sent them a copy of the Dec page I received from the customer showing they wrote it. They had egg all over their face. Needless to say, I don’t place much business with them and I have carriers that do the right thing for us.
Agent, I want to believe your story but am not sure I can. If it’s true, name the carrier. I have never seen that happen. Were there 2 different underwriters at different locations who do not ever speak involved? C’mon, be authentic this time. How much later did they write it? Did their appetite change? What are the details? The world isn’t always against YOU.
Planet, I really don’t care whether you believe me or not. It happened and I didn’t make it up. Same underwriting office, different underwriter, same effective date. Ok for the large agent, not so much for us. Apparently, a different message for one underwriter than the other. The big, multi office agents do get the favorable treatment because of their volume with the carrier.
The world isn’t always against me and I do very well. In this instance, the carrier messed over me. So what. I have other markets that don’t do this.
I believe you. The fact there were 2 underwriters makes sense. They don’t always talk nor share the same discipline.
If I were you, I’d put their paper in the bottom drawer.
Planet, good for you for finally believing me on any topic. Judging from several of your recent posts, I thought you had gone off the deep end. What does it say about management that doesn’t inform all underwriters to respond the same way to any agent that represents them on a submission? I nearly blew a gasket when I saw that policy they wrote for the other agent after we had been summarily dismissed to write it with them.
Yeah, I’d be done with them unless they were my only last option. Not a team I’d want to partner with and it is a partnership.
I find that my acceptance rate depends largely on my loss ratio.
My lead carrier I had a 6.7 LR and all year long, they have been yes yes yes. Two years back, I ran a 140% LR with them and it was hard to get a UW to accept anything from me unless it was 5 years clean.
im sure you can guess why I am at 6.7% this year….
As a commercial underwriting manager for one of the top 3 carriers, I can tell you that you are partially correct. It all revolves around the law of large numbers. A profitable, large agency with good frontline underwriting practices and proven loyalty will often get an exception that a smaller, less “partnered” agent won’t. The larger agency’s loss ratio can absorb it, the smaller agent with mediocre loss ratios cannot. Hence they are more likely to be declined. May seem unfair but that’s just how it works, I’m afraid. That’s not inconsistent underwriting; it’s good business. Carriers know who the loyal agents are vs. those who always submit borderline nonstandard business. It’s an easy guess which of the two will get the exception.
UW in disquise, If any agency has a good loss ratio and profitable, they shouldn’t get a declination on a risk while approving the risk for the larger agency. By the way, I don’t submit borderline substandard business to Standard Market carriers. Those go to excess/surplus lines. Thank you for confirming to me that the large multi location agents get preferential treatment. They denied it in strong terms, but it was there in black and white.
It could be that you know more about the risk or at least told the underwriter about issues with the risk that the other agency did not. Example: I recently declined to rewrite a customer that left my agency about eight years ago – I was not unhappy to see them take their business elsewhere. Another agent (small and rather new) placed this same customer with the same carrier that they asked for me to write them with about three days after I declined. If that other agent had told the underwriter everything that I knew about the risk I feel certain the carrier would have declined to write it. The sad thing is that I called the other agent, shared with him what I knew about the risk and he wrote them anyway. I get performance bonuses from that carrier and the other agents does not – you would think that he would learn from my experience of 37 years vs his experience of about 5 years.
Kent, carriers accepting risks without proper info and Loss Runs are not doing their job. Part of the fault is in the carrier systems with their cookie cutter approach.
Of course carriers play favorites! Wouldn’t you? Which agent are you more likely to make an exception for, the big one with a profitable book that can absorb the higher risk, or the small, unprofitable one whose every submission seems to be borderline nonstandard? Underwriters know which agents are loyal and which ones sell solely on price and submit crap. It is simply good business to grant one the exception and deny the other, unfair as that may seem.
Forgive me, but you don’t sound like much of a UW Manager. How do you have time to blog on this forum? Doesn’t your imcome depend on how much business you are writing for the company?
My experience has shown that bad risks also tend to be service problems. I may lose commission by not going after the bad risk but, in the time that I didn’t lose I can solicit and write good risks that are not time consuming service problems.
Drago! Drago! Drago! I love Mother Russia with the collective hearts of all of my conservative comrades!
Planet, I take it back. You are clearly going off the deep end. Seek help from your psychiatrist.
Dont forget … Your never alone with a schizophrenic…
For some, its just another night on the other side of life.
Multiple Personality disorder can be a serious affliction. In Planet’s case, I think it may be the weed that has turned his brain into mush.
By the way, on your comment about Loss Ratio’s, we have companies that we have an excellent Loss Ratio who give a lot of no’s. It seems that it is tied to their overall loss ratio among all their agents. I made a lot of contingency with one carrier that we didn’t do a lot of growing with because we had a profitable book with them. They don’t seem to be concerned with low growth and don’t come out with much to help the agents write new business. Perhaps that will change with the new President and business makes a good recovery. Nice to see all those new jobs being created and Trump will not be inaugurated for two more weeks. Obama is the lamest of ducks and is just trying to stir up trouble every day. What a loser for a President.
Gee, I wonder why State Farm, Allstate & GEICO all had bad experience in Personal Auto. Could it be the Algorithms?