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Never change marketing strategy-whether it be a soft or hard market.

Customer Service Focus

Challenges in going from soft market to hard market

Despite market cycles, there is at least one constant

By Jackie Honomichl, AINS

Insurance is cyclical; we have been in a soft market for approximately eight years but there are indications that we are now heading into a hard market. Renewal premiums are up 5% to 10%, and those are the ones without losses.

No matter what the marketing cycle, your agency has to differentiate itself. But one must know the characteristics of the cycles in order to adjust.

In a soft market, agencies are vying for new business and up-selling existing clients, but in a hard market they are are trying to hold onto their current book of business. In a soft market, premium is down and add-ons are rampant. In a hard market, premiums are higher and underwriting is more stringent. Insureds tend to shop around more.

As a result, you have to differentiate yourself from everyone else who is trying to get market share. You can do that by providing a service that no other agency provides and that sets you apart from other agencies. Your value-added service could be quarterly loss analysis or you could do a walk-through of the insured's premises to help determine what other coverages the insured might benefit from. A walk-through could also help with any loss control issues the insured might have.

Knowing your companies and underwriters and knowing what they have to offer is a plus, no matter what market cycle we're in. If you want new business, you have to know what types of risks your companies are looking for in order to put the best insurance program together, without having to spend a lot of time sending in submissions where the carrier will not quote.

During a hard market, customer service representatives are busy putting submissions together in order to get the best program. Carriers ask for more information on prospective/renewal clients during a hard market. For example, they want five years of loss runs and financials, and in a soft market they may want only three years of loss runs. The CSRs are definitely busier gathering information for the underwriters during a hard market.

When it is a soft market and premiums are down, clients tend to purchase additional coverages that they might have declined previously. At the present time, many clients are buying employment practices liability because that coverage is somewhat inexpensive and they are hearing about more and more claims for this coverage. EPL coverage can round out a client's program nicely. Some insureds also look at purchasing higher limits or an umbrella policy.

Cyber risks are a growing concern for all types of companies. It's important that you discuss protection with all clients that collect any data because hacking and breaches are rampant. Many carriers now offer cyber coverage.

Competition during the soft market cycle is fierce. Putting together a tailor-made insurance program tells your client that you know his or her exposures. Of course, the same holds true in a hard market; your first priority is to put together the best insurance program for your insured.

Other considerations

Selling on price is never a good idea. As the saying goes, it is a buyer's market during the soft market. If you sell on price alone, you will not build a cycle-proof customer base. Clients you attract on price shop every year for the lowest price. During the soft market you may have the account, but once the hard market comes back you will have a hard time keeping these clients. You have to be able to sell the insured on the coverages and value-added services you provide.

Growth also becomes a challenge during a soft market. In order for an agency to grow, it must maintain regular contact with its insureds, as one of the best ways to get new business is by word of mouth. There is no better salesperson than a happy insured. Ask for testimonials and post them at the agency's Web site. Use customer surveys to find out about routine service activities. Does staff return calls promptly? Is the claims process well managed? Are certificates processed in a timely manner?

No matter what marketing cycle we're in, new business is essential. Looking for sales talent outside the insurance industry can yield some highly motivated salespersons. In order to get the growth you are looking for, you will need to provide support and training, some of which is available through the National Alliance. You can use a well-established producer to mentor the new producers coming on board.

Start your renewal process earlier in order to get your submission out to the best carrier to provide insurance coverage. Coming into a hard market, carriers are looking more closely at insureds' losses, safety records, and financial statements. In a hard market, carriers have reduced capacity so underwriters scrutinize accounts more closely. Insureds can help minimize renewal premium increases by re-examining their safety program to be sure it is keeping accidents and injuries to a minimum, and taking a more active role in managing risks and claims activity.

One essential thing that I have learned is never change marketing strategy—whether it be a soft or hard market. Strive for growth in any kind of market and never sell on price alone. Get to know your underwriters and the appetites of your carriers so you are able to provide the best insurance program for your insureds.

The author

Jackie Honomichl, AINS, has been in the insurance industry since 1979, starting in underwriting for a couple of insurance companies. She has been with Cretcher Heartland since 2004 and currently holds the position of customer service representative. Jackie was the Missouri CSR of the year for 2008 and Kansas CSR of the Year for 2012. For information on the CSR of the Year award or the CISR program, go to: www.TheNationalAlliance.com.

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