The broker's role in writing lawyers liability insurance

(The following article is based on a presentation Ms. Dickey made at the annual convention of the Professional Liability Underwriting Society, which was held last fall in Chicago. She made her comments while participating in a panel discussion on lawyers professional liability insurance issues. At the time, Ms. Dickey was a senior risk consultant with Professional Risk Specialty Group, a part of Brown & Brown of Ft. Lauderdale, Fla. Currently, she is a self-described entrepreneur in Atlanta, Ga.) I would like to talk about the challenges–both carrier- and client-related–that brokers face when selling lawyers professional liability insurance. The broker, of course, is the middleman, but often we feel more like referees.
The first carrier-related challenge I'd like to discuss is the area-of-practice issue. Many carriers have a zero-tolerance policy for certain practice areas and classifications. The perception is that if a law firm is involved in a hazardous practice area, it is a bad risk. Of course, that's not necessarily true. Some firms, especially if they work exclusively in such a practice area, may be so adept at what they're doing that they actually are excellent risks. From an insurer's viewpoint, I'd think such law firms could make desirable insureds, because the carrier is going to get more premium from them than from typical law firms, while their loss experience should be better than average. So I think underwriters should look more closely at such law firms instead of automatically rejecting them.
If you are an agent or broker, your job is to persuade carriers that such law firms are good risks. Before you start the application process, talk to the clients about their practice areas and see if there are potential problems. Then you can plan how to deal with them and present them to your carrier in the best light. Find out what the underwriters' issues are with that particular practice area and, if possible, what information they are going to need to become comfortable with the risk. A carrier often may be willing to consider a risk if you can get certain information about likely concerns upfront, rather than having to go back for it later.
Discuss potential underwriting problems with clients, so they will not be surprised. For example, law firms with class-action practice areas were surprised when it became a hazardous area. They didn't understand why they suddenly were being declined or their premiums were being increased. It's important to discuss any thorny issues with clients; let them know insurers will raise them. At the least, explain why carriers regard a given practice area as hazardous. Explain the loss frequency or severity issues. Be upfront with clients. If you leave them in the dark, problems can arise later.
Whenever possible, set up a conference call or meeting between the client and the carrier during the underwriting process. Increasingly, carriers seem open to this. Clients really appreciate a carrier's attention. They get a better grasp of the underwriting process, and the contact makes them feel that the carrier is really interested in obtaining their business. Both the client and the carrier often walk away feeling satisfied with the interaction. In particular, I would recommend this approach for “iffy” situations.
The second carrier-related issue I'd like to discuss is the paperwork challenge. Carriers often demand an onerous number of completed forms before they will quote on an account. This is a huge roadblock to writing new business. Brokers and carriers need to work together on this. Sometimes law firms actually will stay with their current insurer–even when they know they can get a lower indication from another carrier–simply because they don't want to go through the process of filling out the forms. This is especially true with large law firms.
Carriers' perceptions seem to be that if a law firm is serious about obtaining coverage, it won't mind providing the required information on the company's forms. Carriers also believe their own forms must be used, rather than those of other insurers, if they are to have all the information they need to quote the risk. But law firms just hate filling out multiple sets of forms for different carriers. If they fill out one insurer's forms, they often feel insulted when asked to complete another carrier's forms too. They feel the forms are redundant. In some cases, law firms actually believe that a carrier is deliberately making it difficult for them to obtain a quote because the insurer really isn't interested in writing the law firm's business.
If an insurer really has all the information it needs to provide an indication from another carrier's form, is it necessary to require the law firm to transpose all that data to the insurer's own forms? I think insurers should accept one another's forms, then ask law firms only for whatever additional information they may need to provide an indication. That will make law firms feel as if the carrier really desires their business. Of course, the carrier's agents will be eternally grateful for making their job easier.
Now I'd like to turn to client challenges. The first is law firms' perception that brokers are just trying to close the best possible deal for themselves. They typically believe that all policies are created equal. Often, when you ask law firms if your quote is “apples to apples” with existing coverage, they'll reply affirmatively if the quoted limits and deductibles are the same, while they completely overlook substantive differences in coverage.
This problem arises particularly in new-business situations. The client believes that if you try to discuss any policy differences, it's merely sales talk, not a serious discussion of possible coverage gaps. So they have a propensity to brush you off. As brokers, we have to take responsibility for that, because our tendency is to talk about what we can do for the client in general, as opposed to actually pointing out specific problems that we can solve for them. So when producers get in front of a client, they should have a 30-second spiel about their capabilities, then spend the rest of the time talking about specific things they can do for that particular law firm.
Despite what prospects often say, cost is usually not the determining factor in the law firm's selection of a broker. What law firms really care about most is the service the broker can provide, and whether it is superior to what they're currently getting. They also want to know that they have a financially stable carrier. They want a carrier that handles their claims efficiently. They want the coverage that they need to be protected. Price is usually the least important factor in their decision.
The client's trust in the broker is probably the deciding factor. A law firm will stay with a broker whose coverage costs a little more than others' if it trusts that broker. On the other hand, it will make a change if it doesn't get that feeling from its broker. That creates an opportunity for brokers to get new business–by being honest and trustworthy, not by presenting a cheaper quote.
A broker must take great pains to explain any policy or carrier differences to clients. I say “great pains” because, as I previously mentioned, law firms often believe such discussions are just sales talk. You really have to get their attention and stress the importance of what you're saying. Give them examples of something that could quickly blow up in their face if they don't do something about a coverage they currently lack.
Our duty as brokers or agents is to explain coverages and features–even when what we're offering is not as good as what a prospect currently has. I think we often fall short because, as salespeople, we want to hit the highlights of our proposal and maybe downplay any weaknesses. But I advise you to be perfectly honest about any points where what you are offering is not as good as what a law firm has. That's crucial if you want to gain the prospect's trust. You may not get the account, but that's a risk you have to take. The law firm will remember your candor and may come back to you, as well as recommend you to others.
Talk to law firms about all of their insurance needs, not just lawyers professional liability insurance. Tell them about any other products you offer that may be applicable to them. With clients, don't ever miss a cross-selling opportunity. Find out if they're happy with the person who's handling their workers comp or other forms of insurance. Offer alternative services too. I think this will become increasingly important. We'll see more brokers providing risk-management training, risk-management assessments, etc., for law firms. Such services build appreciation and trust. In the end, you're going to win and keep a law firm by being honest and attentive.
The second client-oriented challenge I'd like to discuss is how the volatility of the insurance market affects the trust a broker tries to build with a law firm. While insurers set pricing, the perception of law firms typically is that brokers have complete control over it. This is the reason they often bristle when we ask them for a competitor's or incumbent's pricing, because they think we want it only so we can slightly undercut it, when we could actually go a lot lower. So you often hear, “Just give me your best quote.”
Explain first of all that you have absolutely no control over pricing. I really don't think law firms understand that. Then tell them you need to know what they currently are paying, because it will give you a quick idea of whether you can offer them something superior in terms of quality and price. Let them know that you need this information because you don't want to waste their time (or yours).
Add that insurers may be willing to negotiate premiums, depending on the risk. That's another reason it's in law firms' interest to share pricing information with you. I would explain that this process is similar to a settlement negotiation, which may help them understand it. A prospect, of course, will try to get the premium as low as possible. The carrier, meanwhile, will stay in the negotiations until it either lands the account or can't go any lower.
I realize that in the post-Spitzer era, there can be problems with sharing competing quotes among carriers. I would try to address that by getting written releases from your clients explicitly authorizing you to share such information.