Hard Market Lesson: E&S Broker Advice

"Working with one person, there is a mutual desire for success," she added.

The advantage here is that the retailer knows what the risk appetite of the wholesaler is and also knows who within the firm the risk submission should go to, she noted. This makes for an efficient process and a situation where the wholesaler would be more willing to put a little extra effort into the application than if it were a complete stranger.

The Internet can be a friend or a curse for the retail agent and broker, noted Stacey W. Shurson, president of IIW Insurance Services of California, in Dublin, Calif.

Underwriters, if they have a question, can search online and get more information about a risk. In some cases, this can mean unearthing facts about a risk that can effect its underwriting.

In one case, she said, the application said the client was a retailer in walkie-talkies. A search of the Web revealed that the applicant was a dealer in an extensive line of police equipment sold over the Internet, which changed the risk profile substantially.

While the Internet can unveil information unfavorable to a risk, it can also help explain the risk better, she said.

For instance, a retail agent listed a health clubs Web site for explanation of aerobic activities that took place at the club, some of which were unfamiliar to Ms. Shurson and others. The site described the activities, which were viewed as safe.

"Its handy to have the Internet, but it can hang you too," she said.

When it comes to writing up an application, there are some basics agents should remember to do.

Roay Azari, senior underwriter and team leader at Delta General Agency Corp., in Houston, noted that agents fail to familiarize themselves with rating classifications critical to the underwriting. Some of the most basic things, such as the name and address, should be checked for completeness.

Agents also need to understand how much coverage a policyholder really needs. Taking a couple of different sources of financial information and adding them together only means coming in with extremely high limits that the policyholder does not need. Ask what should be calculated and what should be covered.

"They dont understand what coverage is needed and dont ask questions," said Bill Fink, president of Delta. "They just come in with high limits."

A potential errors and omissions issue, and something some retail agents and brokers fail to do, is review their renewals, said Mr. Fink. Carriers are changing policies, making them more restrictive on renewals. A retail producer may assume a policy is the same and fail to discover the changes until after it is bound.

"That is a big issue," said Mr. Fink. "It is critical that [agents] pay attention."

Agents and brokers must also recognize that when they deal through the nonstandard market, some aspects of their relationship between the producer and company may change.

For instance, Mr. Fink and Ms. Azari pointed out, some agents wrongly assume they can print out certificates of insurance directly from the company. Because they are dealing through the wholesaler, the certificates need to be issued through the wholesale broker.

"There will always be plenty of opportunities for agents to get it wrong in any market cycle," reflected Mr. Fink.

"All this requires agent care and desire to want to provide a quality product. There will certainly be tools that will become more readily available, like the Internet, to provide an easier path with fewer opportunities for error. But at the end of the day it is a question of how much care the person who is doing the work is going to put into what the end product is going to look like."

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, January 30, 2004. Copyright 2004 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.