Prepare for a Successful Renewal in a Transitioning Market
Nine steps to a successful renewal in a transitioning market
With upward pressure on commercial insurance pricing in many regions, it's vital for insurance buyers to differentiate their risks and start the renewal process early.
Marsh data indicates that many insurance markets around the world are in transition. Average commercial insurance prices rose by 3% in the first quarter of 2019 — marking the sixth consecutive quarter of increases, according to Marsh's latest Global Market Insurance Index. This increase has been driven mostly in the property and financial lines, specifically directors and officers (D&O) liability insurance.
Despite tightened pricing and underwriting guidelines, however, there is still plenty of insurance capacity — particularly for organizations that are able to differentiate their risks. The following steps can help an organization to ensure their renewal goes as smoothly as possible:
- Start early
Start strategizing with your broker and collating renewal submission information at least three months before renewal.
- Be transparent
Anticipate that insurers will require more detailed underwriting information. Work closely with your broker to establish the most effective way to present underwriting information. Where possible, identify and use marketing differentiators, such as videos profiling risk control, operations, supply chain management, and other salient features of your risk management program.
- Identify your risk appetite
Work with your broker to identify your appetite for your own risk through retentions, coinsurance or exclusionary language, and formulate an idea of what will constitute an acceptable renewal program.
- Capitalise on the value of your insurance broker
Satisfy yourself that the insurance broker and individuals working on your account have sufficient experience of operating in a harder market, and have strong relationships with the decision makers to whom the risk may ultimately be referred.
- Use your relationships
The strength and size of a corporate relationship will be taken into account in the underwriting process. It can therefore make sense to use the same insurers who are involved other insurance placements where possible, in order to secure visibility and senior management involvement, as well as maximum leverage in negotiations.
- Involve your C-Suite
Having your senior management – ideally CEO or CFO – involved in a presentation given to insurers demonstrates how seriously your company regards the renewal process, and enables underwriters to directly ask them questions. It also builds trust, which will be crucial later in the process when trying to get markets to release terms early enough for them to be carefully evaluated, and for the broker to obtain terms from alternative primary markets and/or excess layer markets.
- Don't just focus on cost
Although budgets may well be challenged by increasing premiums, it is important not to lose sight of the big picture: saving a relatively modest amount now by reducing coverage may have a much larger negative impact to your business should a claim occur.
- Establish claims and service protocols
To reduce the risk of an actual claim becoming adversarial, set out ‘best-practice’ protocols that clearly set out the responsibilities and expectations for both insured and insurer at the outset of the policy. Similarly, agreeing service protocols provides clarity about the expectation levels for response times, which will help to reduce potential conflicts.
- Stick to agreed milestones
Allow time before renewal to get all capacity in place and policy wordings agreed. If a strict timeline is not adhered to, placements can lose momentum while insurers concentrate on more pressing issues. Even worse, you may be forced into rash decisions because the expiry of your current program is approaching and things are behind schedule.
Despite the transitioning market conditions, competition among insurers remains high, and capacity plentiful. Working closely with your broker well in advance of renewal will help you not only secure favourable renewal terms and conditions, but also to forge a partnership built on trust that will endure when you need it most.