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The excess and surplus market saw its ninth straight year of growth in 2020, with double-digit increases in direct written premiums. A few well-known trends have driven more business to E&S carriers in recent years.
Increased frequency of natural catastrophes and severity of weather-related losses drove hardening in the property market. Social inflation and climbing verdicts had a similar effect on casualty coverages, particularly for excess casualty placements. The pandemic exacerbated losses on both sides.
With rates rising and capacity shrinking in the admitted market, more agents have turned to the E&S space — the “market of last resort” —when the standard market isn’t an option.
More and more carriers are enhancing their E&S offerings in ways that are beneficial for retail agents to consider. These carriers’ offerings can provide certain benefits that make direct placements an alternative when this is needed by an agent.
“Retail agents increasingly need to procure both admitted and non-admitted products for their customers to create the comprehensive coverage clients need. With direct access to E&S on the rise, agents have more strategic options for finding the best opportunities to place their E&S business—options that can make it easier to serve accounts and maximize their relationships,” said Steve Mills, Head of Excess & Surplus for The Hanover Insurance Group.
In order to maximize the benefits of placing business directly with a carrier with E&S capabilities, retail agents should look for a carrier with these four characteristics.
While some clients need a straightforward stand-alone E&S policy, others require solutions that pair products from both the standard and E&S markets. When a carrier’s surplus lines appetite is a natural extension of their standard lines appetite, agents can more easily procure seamless coverage from one source. This yields operational efficiency for the agent — at a time when operational excellence is more critical than ever — and a higher level of customer service for the client.
“There are several advantages to binding coverage directly with an E&S carrier including appetite alignment between standard and surplus lines offerings, the ability to combine bills into a single payment plan, streamlined servicing on the part of the agent and a reduced risk of coverage gaps,” Mills said.
“When E&S underwriters work hand in glove with underwriters on the admitted side, they can dial in on unaddressed exposures and develop more tailored solutions, eliminating the need to shop around to piece together a comprehensive solution.”
This integrated approach also means a more streamlined claims process. If a loss impacts more than one policy, there is no finger-pointing, sparing the time and expense of trying to figure out who should pay.
A broad appetite across a variety of risk exposures supported by a diverse portfolio of products signals that a carrier with E&S capabilities is not too heavily invested in any one class or line of business. This allows carriers to provide consistent support without the need to make radical shifts in underwriting practices, offered capacity, terms and pricing.
Especially now in the midst of hardening market conditions, agents can use the extra assurance that their partner can provide the same level of consistent support year-over-year. This will be especially important as more exposures straddle the line between the standard and surplus lines market.
“Financial stability and longevity are key, especially when dealing with long-tail risks,” Mills said. “When an E&S carrier has a broad appetite and suite of solutions, it is less vulnerable to dips in profitability in any one line of business.”
E&S carriers who offer the option of accessing their products via a dedicated E&S underwriting team that can leverage in-house brokerage capabilities provide added benefits to retail agents. When coverage is bound directly with an E&S carrier leveraging in-house brokerage capabilities, the broker can administer the collection and filing of surplus lines taxes and fees, which provides retail agents with the surplus lines compliance that is required, providing additional operational efficiencies as the retail agent won’t have to execute these tasks.
Dedicated E&S underwriters with specialized E&S and line of business-specific expertise know the risks they cover inside and out, and they understand the unique needs and challenges of their target market. This understanding enables the provision of pre-negotiated coverage enhancements. These enhancements supplement ISO forms to provide coverage that is tailored to the unique needs of specific clients.
“I think it’s critical to look for that specialized, technical expertise in your industry because you get a higher quality product and service. Agents can do their jobs and serve their clients best interests more effectively if they have a carrier with E&S capabilities who really understand their needs,” Mills said.
In a world where risks are continually evolving and financial pressures are at a peak, efficiency and effectiveness are must-haves for any retail agent — especially for those servicing smaller accounts with thinner margins. Carriers with customer service centers that manage small E&S policies as part of their standard and specialty lines capabilties can help agencies effectively service these policies while improving their economics.
“By placing E&S policies into service centers, agents are improving the efficiency of their operations,” Mills said. “This saves agencies valuable staff time, creating capacity to generate critical growth by focusing on new customers.”
When an E&S policy is one piece of an account-focused solution, an all-lines customer service center can offer even greater value to agents by eliminating the need to either split the servicing of small business accounts, placing BOP business in a service center and retaining servicing responsibilities for small specialty, or retain servicing responsibilities for the full account. This ensures the account is serviced holistically and helps agents fully capitalize on the benefits service centers offer.
In 2019, The Hanover implemented a new approach in its E&S business designed to make it easier for retail agents to access the products and services they need.
Through Hanover Specialty Insurance Brokers (HSIB), The Hanover Insurance Group’s in-house E&S brokerage that supports the dedicated E&S underwriting team, the company provides non-admitted solutions for accounts with challenging exposures that are already in, or are headed to, the E&S market.
“Our appetite in this space complements and expands The Hanover’s admitted commercial lines product offerings, enabling agents to provide admitted and surplus lines solutions on a single account, through a single carrier,” Mills said.
“We also offer the service of administering the collection and filing of surplus lines taxes and fees, which provides retail agents the surplus lines compliance that is required. This is all part of our holistic, total account approach. We know that exposures are changing, and agents are looking for different ways to structure solid but affordable coverage for their clients. We have to be able to adapt alongside them and anticipate evolving needs.”
Another feature of the HSIB offering is several billing options to provide agents and their clients with more flexibility. These include direct bill, online bill payment and installment plans. Combined billing may also be an option when coverage includes both standard lines and E&S products in tandem.
The HSIB offering is also backed by The Hanover’s financial strength — writing E&S business on non-admitted member company paper that has earned an “A” rating from A.M. Best, S&P and Moody’s. Stability matters, and agents can feel confident in The Hanover’s staying power, even as the risk environment continues to change.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with The Hanover Insurance Group. The editorial staff of Risk & Insurance had no role in its preparation.