Despite a heavy push for new business by insurers, managing general agents should be prepared to take a pass on questionable risks, an insurance executive said.
That advice came from Chris G. Behymer, vice president marketing for Markel Southwest Underwriters Inc. out of Scottsdale, Ariz., who also counseled that MGAs should ready their staff for the point when rates begin to rise again. Mr. Behymer made his suggestions yesterday during a lecture here on “Insurance Trends” at the 82nd annual meeting of the American Association of Managing General Agents. He noted that the driver of the current insurance soft market trend is an enormous amount of capital available to insurers who are looking to employ it sometimes in markets they don’t understand. Targets for his criticism were the technology market aggregators where, he said, no underwriter is reviewing the risks before issuance of a quote or policy. If the premium is at or below a certain level, some underwriters are not reviewing the risk, he said. This practice, he observed, will only lead to problems later on. “It will catch up with them,” he said. The industry, particularly investors pumping capital into the system that do not understand the industry, are helping insurers to grow markets, but not necessarily in an intelligent and productive manner that truly understands risk, said Mr. Behymer. “We have to do a better job of growing profitably and consistently,” he said. The industry has had the good luck of not suffering major catastrophes the past two years, but higher values in catastrophe-prone areas could spell a spectacular loss, possibly over $100 billion, should there be a weather-related incident in a vulnerable coastal region, Mr. Behymer cautioned. There are a number of steps, he said, that the MGA community should take to prepare for the future. Among the suggestions:
- Educate staff to be ready for changes that will come with the next hard market.
- Build strong relationships now with carriers and customers by providing great service and quick turnaround on quotes.
- Improve efficiency and communication with customers.
- Make sure your agent customers know the business they are in or it can prove to be a money losing proposition partnering with them.
- Build and improve technology, but remember that it will only be effective when the previous suggestions have been implemented.
His final piece of advice to the MGAs was, “Know what [business] to walk away from and what makes sense. If you don’t think it makes sense, say it doesn’t and that you’ll take a look at it next time.”