Hard Market Hikes Demand For Services
Buyers are going to need all the services from agents and brokers they can get, as what was considered a firming insurance market a few weeks ago turns extremely hard following the Sept. 11 terrorist attacks on the World Trade Center and the Pentagon.
The first priority after the attacks for brokers was to identify the clients affected, contact them and alert carriers to potential claims.
Despite the numbers of missing from their offices in the WTC, both Marsh and Aon informed their clients that they were gearing up to help customers with claims assistance. Both companies utilized back-up systems to recover data lost in the attack and positioned their offices with staffing and instructions to give assistance to clients.
Aons chairman and chief executive officer, Patrick G. Ryan, asked property-casualty insurance companies that issued policies to its customers not to issue any cancellation notices or changes in terms and conditions, and to provide 60-day policy extensions. He said that most carriers agreed.
After the events of Sept. 11, other brokers went into action to identify exposures and begin the claims process.
London-based Willis, despite having to close its downtown Manhattan offices after the attack, re-established operations in New Jersey and was busily assessing the needs of clients and working with carriers on claims, said Dan Prince, director of communications for Willis.
San Francisco-based USI Insurance Services identified between 12 and 15 clients with offices in the WTC and surrounding area that might be affected, said Thomas ONeil, chief executive officer of the Northeast region.
Mr. O'Neil said that claims would range from workers compensation to property to group medical and life. The firm has its catastrophic claims team in place and also set up Web links to direct clients to carriers and counselors, he said.
The Internet has proven invaluable in meeting this crisis, according to Kenneth Sciara, president of Hilb, Rogal and Hamilton of New York, a part of the Glen Allen, Va.-based insurance brokerage.
Much communication following the disaster is being done by e-mail, which is helping clients who were displaced from their offices by the terrorist attacks.
One claims area of note is business interruption, explained Mr. Sciara. The firm has contacted carriers to inform them they would be affected and began the process of calculating time lost, he said.
Most clients should be covered, even if they sustained no physical damage, according to Mr. Sciara, because their closing was ordered by civil authority, but compassion by insurers is still needed, he added.
"Some clients will have to rely on the insurance companies to be reasonable and understanding, and they have been," Mr. Sciara said.
It was too soon for Arthur J. Gallagher and Company, headquartered in Itasca, Ill., to give a public assessment of what clients were affected, or even a sense of how much the claims would be, said Jim Gault, executive vice president of brokerage services.
"This is unlike anything that has ever happened to our industry," Mr. Gault observed. "No one has a real good idea what the claims will be. We all are being understanding right now."
Generally, insurance executives relied on total claims figures being bandied about publicly that ran as high as $75 billion.
But no matter what the final figure for damages, this seems destined to end up as the most costly disaster in U.S. history in terms of insured losses, dwarfing Hurricane Andrew in 1992, which resulted in $15.5 billion or so in claims, industry officials agree.
What was a firming commercial insurance market viewed as a reasonable correction, will now probably turn into a hard market, leaving many clients in the cold, brokerage executives warn.
"We are in a very fluid environment right now," said Bernard H. Mizel, USIs chairman and chief executive officer, noting the uncertainty about the impact on individual insurance companies.
However, Mr. Mizel said that he remains "bullish" about the future of the insurance brokerage sector, explaining that such firms have been seen as "a safe harbor" by the investment community in the past because they deal in services, not the taking of risk.
"We, the industry, are still trying to assess this from a business standpoint and what it means to our customers," said Jack McGrath, senior vice president for new business and product development with Hilb, Rogal and Hamilton, as other brokers and their clients move past the Sept. 11 tragedy.
The future focus on services, Mr. McGrath noted, would deal less with developing new services and focus more on responding to customers' needs in the wake of the attack.
As renewals approach, some carriers are already beginning not to renew business or give extensions, brokers say. Some carriers have pulled their quotes on risks before they were bound, brokers noted.
There appears to be no pattern to the increased pricing that is already taking place, observed Jim W. Henderson, executive vice president for Brown and Brown, headquartered in Daytona Beach, Fla.
However, Mr. Henderson said that he felt there would be a lot of re-evaluation going on by carriers.
Mr. Henderson recommended that brokers begin doing a lot more shopping of companies for their clients as renewals approach and give plenty of time for research. He also advised making sure that customers understand the new reality of the marketplace.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, October 8, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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