For the agents and brokers writing commercial-lines insurance for Main Street clients, business remains tough—but some tepid signs of improvement have begun, tentatively, to appear.

“What we are really beginning to see in the soft market is stabilization,” says Mike Miley, chairman of the Independent Insurance Agents & Brokers of America and client executive for the independent agency Gibson based in South Bend, Ind.

From a pricing standpoint, premium rate decreases are “slowing down a lot” on middle-market business, Miley says. “We still see some decreases, but a lot of [pricing] is flat and some [business] may have a couple of points increase in rates.”

In another observer's view, the best way to sum up the current climate commercial-lines agents are experiencing is “half a hard market.”

As carriers have reported greater loss deterioration over the past three to five months, pricing remains soft, but underwriting is becoming hard, explains Stan Logan, executive vice president in charge of sales management at Logan Lavelle Hunt in Louisville, Ky., and a board member of the National Association of Professional Insurance Agents.

Where carriers the last few years were willing to make concessions for a risk, today they no longer will. And some risks that were being written in the standard market are returning to the wholesale market.

While insurers are beginning to talk about rate increases, that doesn't appear to be happening widely, at least at this exact moment. “Some companies are trying, but one [factor] that is preventing large movement is the economy. A lot of customers can't afford more pricing right now,” Logan points out.

But Logan does think “an increase in pricing is right around the corner”—a bump driven, in part, he believes, by the impact of the Japan quake and tsunami on underwriters.

Logan adds, however, that “not everyone agrees with” his pricing optimism. In fact, some agents have seen the soft market go on for so long they are wondering if it will ever end. “In the past, when producers got together, they would talk about when the hard market would arrive,” says Logan. “Today, they ask if a hard market will ever come.”

A LOOK AT INDIVIDUAL LINES

Among individual lines of business, workers' compensation, driven by increased hiring, is firming up and starting to see some upward price momentum on renewal business.

“Carriers are starting to see some rate [increase] on it,” Miley notes. “That's not to say that for the right account insurers won't do something [to get that business].”

On new workers' comp business, Miley says, insurers will still aggressively price that business, “but they are not as aggressive as they were a year ago.”

Another area where agents might be seeing some improvement is in commercial auto, propelled by more vehicles being back on the road, notes Steve Ward, chief operating officer for small commercial business at Travelers. He adds that generally the BOP (business owner's policy) is a more stable line today for producers.

With directors and officers insurance for nonpublic companies, pricing remains competitive, according to Miley, but underwriters are asking more questions than they did nine months ago on the business.

Construction remains a nongrowth area, but manufacturing is seeing a little comeback, in Miley's assessment.

WHOLESALE VS. PRIMARY

Over the past few years, when competition was intense, primary insurers were pulling business away from the wholesale market. Today, the opposite is true, says Logan.

“Underwriters have been instructed, 'Don't be afraid to walk away' from business,” Logan says. “They've gone back to their underwriting guidelines and are bringing some normalcy back to the market.”

With some business returning to the wholesale side, he says producers are also seeing accounts that were once bundled together now needing to be broken apart because carriers don't want all of the risk. He says an example of this is in the case where equipment coverage needs to be purchased separately from the rest of the book because of a loss.

Logan notes that for his agency of around 50 employees, doing that is easy. But for small agencies with just a couple of employees, it might not be as easy to execute because of the extra work involved in having to find another market.

CARRIER COMMENTS

With 8,000 agents selling small commerci

al policies aimed at companies with 50 or fewer employees, Travelers has a great deal of on

-the-ground, grassroots intelligence flowing its way about market conditions.

Right now, it remains a difficult market for these agents, who primarily sell policies covering general liability and property, along with workers' comp, commercial auto and umbrella. And pressure on their revenue streams continues as a result of the soft market and economic downturn.

But there is reason for optimism, says Myles Gibbons, vice president, small commercial field product and distribution for Travelers.

“There are indicators that the economy is starti

ng to improve, and that gives some level of opportunity for our agents to feel

confident about this segment,” says Gibbons.

He notes that agents who are seeking to improve their business need to emphasize “that check-in discussion” with their commercial clients—a periodic call to find out what is going on and provide strategic counsel to clients.

Gibbons also underscores the importance of agents utilizing the tools of risk management with their clients to control risk and also to use it as a way to differentiate themselves with their clients.

Special Reports /

Commercial-Lines Agents See Faint Light At End Of Soft-Market Tunnel

Related Stories

Recommended For You