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Excess and Surplus Market: What It Means for Your Business

Independent agents have thrived as generalists. Historically, their bread-and-butter business has been P&C, life, health — the standard, core coverage with economical pricing and a straightforward process. But these agents are also always on the lookout for new opportunities to expand their books of business.

One such opportunity just might be in the excess and surplus (E&S) market. Thanks to a strong U.S. economy, evolving threats to business and an unwavering entrepreneurial spirit (let’s not forget litigiousness), the E&S market is taking hold in a big way. According to the Surplus Lines Stamping Office of Texas’ 2018 mid-year analysis, reported E&S premiums totaled $15.7 billion — up by about $1.4 billion from 2017. And, over a seven-year period, E&S premiums have grown by 67%.

Good for Business

E&S is, in fact, a market niche that deserves attention. The E&S market encompasses classes of business declined or not covered by standard P&C or business owner policies. They could be high-risk like firearm manufacturers or hazardous materials haulers; or those that don’t fit standard underwriting like helicopter skiing, acroyoga, avalanche control or zipline courses; or specialty coverage like concerts or outdoor events; or even for businesses that have a history of unacceptable loss. Without E&S coverage, many individuals and businesses would need to either self-insure or go without any insurance at all — and possibly face a worst-case scenario with a lawsuit.

Even though E&S policies might comprise a small part of an agent’s overall income, offering it is still just good business — especially if the agent’s goal is to become his clients’ trusted advisor. Aside from expecting their agent to take the initiative and understanding what’s in their best interest for coverage, clients are looking for a seasoned professional with proven expertise in a variety of markets. By adding E&S coverage to their portfolio of offerings, agents will create value and opportunities for upselling. Agents can ferret out potential E&S business from prospects or even existing clients by asking some basic questions: Do you have exotic pets? Do you own firearms? Do you rent or own recreation vehicles? Do you coach or volunteer? Do you train, mentor or provide care for others? Chances are, many clients will answer “yes” to at least one of these, opening the door to a discussion on E&S coverage.

Offering E&S can future-proof an agent’s business as well, as it’s intertwined with the rapidly changing liability landscape of innovation. Truly, this is the best time in history to sell E&S insurance. As mentioned earlier, the number of policies written has increased in recent years, and that number is still climbing. Offering E&S provides a path forward for the agent’s business.

What to Look for In a Carrier

Despite simpler processes, E&S can still be daunting. For an agent new to the E&S market, handling an E&S claim can quickly go awry. Therefore, agents moving into E&S should consider relying on a partner for help in everything from the first phone call to underwriting to risk management. The partner doesn’t have to be an MGA or broker (unless the agent is already working with one); rather, the agent could work directly with a reputable carrier to help navigate the E&S market.

With dozens of carriers to choose from, the selection process can be overwhelming. Start by ensuring that the carrier has a positive financial reputation and AM Best rating. An independent agent should also look for a carrier that has a long history of expertise in the E&S market, and can engage from the start with both the agent and customer to align on the customer’s goals and risks.

Independent agents will find the best E&S carriers not only provide competent claim handling, but also deliver rapid- response underwriting and provide risk management services throughout the term of the policy. In addition, the right E&S carrier partner will fight frivolous or meritless claims. Unfortunately, manufactured litigation is now a reality. Settling frivolous claims might seem to be the easier path, but it ends up to be more costly in the long run, as many carriers refuse to pay litigation costs that exceed the settlement value.

Finally, the agent’s E&S carrier should be flexible enough to modify policies and forms based on the applicant’s need. Specialty coverage is difficult to fit into a neat little box; a knowledgeable carrier knows this and works with the applicant to customize.

Prime Insurance Company: Here to Help

As a dedicated specialist in solutions for unique, difficult and declined risks, Prime Insurance Company is one partner that ticks all these boxes. For almost 30 years, Prime Insurance Company has provided customized policies to protect individuals and businesses against loss. Its emphasis on partnership, flexibility and underwriting have made it a leader in the E&S market, at the ready to help independent agents tackle underwriting across risk classes. Prime Insurance Company provides solutions for commercial general liability, garage liability, personal lines, commercial auto, and specialty and professional liability.

The moral of the story? Don’t turn away business just because it’s a hard-to-place or difficult risk. The processes in the E&S market are much simpler than they used to be. The rewards are there. And with the right partner, E&S is agent-friendly. Why should the agent lose business to his competitor because E&S coverage is too daunting or complex? Find a partner, dig in to E&S and begin to reap the rewards.

About the Author:

This article was written by BenefitsPRO on behalf of Prime Insurance Company. For additional information, contact Jenna Contreras at (312) 884-5813.

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