In the current mid-market environment, which experts say is characterized by competitive business and downward market pressure, brokers may still find insurers more selective in certain lines.
But after a submission has been declined, there’s an opportunity for brokers to press underwriters for more information. And if an underwriter maintains their decision, brokers can use that feedback to explore other options, experts said at Canadian Underwriter’s “Mastering the middle market” webinar.
Mid-market conditions
“The mid-market business is competitive right now,” said Eric Osborne, chief growth officer at Navacord. “It is a softening environment, and it can vary by industry, segment or class of business, but we are seeing much more capacity available to these clients in the marketplace.”
And the dynamics of competition and market conditions are shifting not based on client company size (i.e. small, mid, or large), but within specific verticals of coverage, said Sarah Scott, vice president of commercial insurance at Wawanesa.
“The difference between the small and mid [market] softening, it’s not so much this separation with the horizontal [i.e. company size]; it’s more the verticals of the operation,” she said.
“Something like residential realty, which was really hard in the past few years, is starting to become more competitive,” Scott said. “But retail is one where there’s always been a bit of a challenging loss ratio, so maybe not so competitive there.”
A broker’s course of action
Commercial mid-market brokers may still see declines that stem from reduced capacity in specific segments, or insurers who are tightening their risk selection.
But brokers can deal with those hard market declines by asking their underwriter for an explanation.
“There are a lot of different ways in which we approach it, and I think one is to go back and ask the hard question of why they’re declining,” said Falak Kothari, senior vice president and national corporate leader of manufacturing at Marsh McLennan.
It’s important for brokers to ask why their client has been declined, “because risk does not always equal to a loss. Risk can also mean an opportunity,” he said.
Then, brokers can pursue other options that are informed by the declining underwriter’s decision.
“It’s [about] trying to understand and break down some of those nuances around where the insurer’s concerns are, and then broadly understand if those concerns are shared by a wider set of insurers and if those are genuine concerns,” said Kothari.
Mid-market insurers judge their performance in each segment using data to determine their capacity in the mid-market, Scott said.
“This goes back to where insurance companies are performing and where they feel that they’ve got a good penetration of business in that they may be able to adjust their rates a little bit because [they’re running below an] acceptable loss ratio…so they want to grab more of the marketplace.”
So, if multiple insurers share the same concerns about a client or certain business line, brokers can go back to their clients and determine how they can mitigate their risks.
Then brokers can return to the market and explain what measures their client is taking to control their exposures, said Kothari.
“Alternatively [brokers can] look at markets beyond the domestic markets and at solutions outside,” he added. “Because…as brokers, we have to be creative and look for solutions beyond the Canadian borders and try and bring the best to our clients.”
Feature image by iStock.com/anyaberkut
