AJ Wayne is proud to introduce a new blog series entitled Everyday Expertise, where our experienced brokers share valuable knowledge and observations that may be new and helpful to you and your agency as you navigate the world of Professional Liability insurance.
Enjoy our second installment below!
The Renewal Account in Jeopardy
At the end of every quarter, it is inevitable that competition will begin to heat up as insurance companies do their best to try and write as much business as possible. When competition intensifies, the resulting downward pressure on renewal premiums can be stressful for any insurance agent.
It is fairly common for me to get a call on a middle market or large account with higher limits that my agent controls advising that another market has undercut the account. Larger accounts with higher limits are prime candidates for competition because of the high cost of capital associated with concentrating a five-million or ten-million dollar layer with one insurance company.
When I get calls looking to save a renewal in jeopardy, one good strategy is splitting up the limit liability with excess liability insurance. Doing this has two primary advantages to the insured. The first advantage is that it is often cheaper for the primary insurance company to offer a two million or three million dollar limit instead of offering up the full five million dollar limit since the incumbent market is no longer being asked to take as high of a risk on one account.
The second advantage is that a new excess carrier can often offer a secondary limit above the primary limit at a discounted rate because the excess insurance company is further removed from the risk. With the excess underwriter viewing the primary layer as a large deductible from a claims perspective it often provides the excess underwriter room to be much more aggressive on pricing.
Pursuing excess insurance is always an option when faced with a renewal in which there is competition but is not always a magic bullet. Making sure the excess is true follow form coverage and having multiple insurance companies involved in the event of a claim are some of the downsides that the insured has to be aware of on their side if an option like this is made available. Being flexible and thinking outside the box is the best way to do the right thing by the insured.
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