The hard market is making insurance agents increasingly turn toward the surplus lines market to find coverage for their clients. Direct surplus lines premium grew for the fifth consecutive year in 2022, surging 19.2% and accounting for more than 11% of total property-casualty premium. Surplus lines premium also grew 15% in the first half of 2023.
A big question for agencies is whether they are managing all that surplus lines activity efficiently. If your agency is using labor-intensive procedures for these placements, the answer is probably no. Fortunately, there are ways to reduce your costs.
Work with technology savvy brokers. Wholesale brokers and managing general agents (MGAs) tend to emphasize their markets and underwriting appetites in their advertisements. However, the ease of doing business with them should not be overlooked. There are many reputable wholesalers who offer online quoting, binding, and policy issuance for smaller risks. Eligibility criteria may vary, and individual state restrictions may apply. Learn about those in advance to avoid wasting time.
Automate your processes. Are you still using paper coverage checklists for client interviews? That means capturing the information only to input it into your system later. Your agency management system may give you the ability to input coverage reviews directly into the system during client discussions. Install the mobile version of the system on producers’ tablet computers so vital information is captured on the spot.
Most states require a broker to obtain declinations from standard carriers before placing a risk in the surplus lines market. Use your management system’s documentation features to capture and store information about those declinations in one place.
Automate information collection. Providers such as LexisNexis offer tools to enable collecting accurate risk information. With tools like these, there is no need to spend client discussion time asking about details such as the year their building was constructed. The client might not even be sure; these technologies give you accurate information for inclusion in your submissions to wholesalers.
Use automated payment and signature solutions. Because they tend to insure riskier operations (at least in normal markets when standard carriers actually want less risky business,) surplus lines carriers tend to offer less flexibility for premium payment. They often include steep minimum earned premium conditions in their policies and may be less patient when premium payments are late. To prevent these kinds of problems, consider using a credit card payment service such as ePay Policy, one that may be included in your agency management system, or one of these.
Your client may tell you only days or hours before they need coverage. In that situation, there is no time to get in front of them for a wet signature. Your agency management system may offer an electronic signature solution. If it doesn’t, consider a solution such as DocuSign. They can eliminate a lot of stress when time is of the essence.
Automate completing and submitting required documents. Some states require the broker to complete and submit forms for surplus lines transactions. States that have surplus lines stamping offices may require policy documents to be submitted for stamping along with affidavits verifying that a diligent search of the standard market was done. Completing affidavits by hand and emailing them to the stamping office is inviting errors and missed communications. If your state’s stamping office offers an online method for completing and submitting affidavits, take advantage of it. It makes compliance easier and identifies errors immediately. This hard market will not last forever. However, you may still need the surplus lines market occasionally even after it ends. Because the wholesale broker takes a share of the commission, your revenue from surplus lines transactions is less than it is for standard market placements. That makes using this market efficiently all the more important. Implementing these technologies will reduce errors and increase your profit margins when you have to obtain surplus lines coverage.
