The Hard Market – One Agent’s Perspective

by R.L. (Bunny) Oakes, III – President Insurors of Tennessee 2002

Reprint from January/February 2002 Edition of the Tennessee Insuror— Everyone knew the soft market would not last forever, but no one anticipated 9-11. Prior to 9-11-2001 we were in a tightening market. The fourth quarter of 2000 premiums were up on average 5-15% and it appeared we were looking for the same, or a little more, for the fourth quarter of 2001. Then 9-11 hit and industry and world was turned literally upside down. Lots of things are happening in the insurance marketplace right now make no sense and in some cases are close to criminal.

A $10 million umbrella going for $42,000 last year to $142,000 at renewal with numerous additional exclusions is no way to do business in any environment. The insurance marketplace is hitting the commercial insurance buyer with tremendous additional premiums and exclusions that are hard to live with. Like it is the consumer’s fault that they paid less for insurance over the last several years. We all share a responsibility in that rates went down for several years and we need to work together as partners to get rates back to where they are adequate.

I can assure you what goes around comes around. If we as industry don’t act like fair business partners, we can expect nothing less from the buying public as they look for relief. Trucking, healthcare, and construction are three industries that are being hit the hardest, but no commercial buyer is immune. In the construction industry, of which I am familiar with, these skyrocketing premiums are hitting at a time when the economy is slowing down and profit margins are falling for individual contractors.

There is no question in my mind that many construction firms will literally be put out of business because of the cost of insurance. Maybe that’s just the way things happen in the big scheme of things (the strong will survive) but when you are dealing one-on-one with your customer it is a painful experience. Especially when you care so much about your customers. The strong/prepared will survive but you realize sometimes there is little difference between the strong who survive and the one that don’t. A lot the time it is just a matter of timing. A lot of things driving the market we have little control over and all we can do is try to do the best we can on each account as it renews.

Handling renewals more timely and giving and giving much more information to our underwriters are key to taking care of our customers. Working with our customers to be sure they are safety conscious and doing the right things has always been important, but is now more important than ever. The soft market has made us all a little lazy in underwriting and risk management and we all need to get back to doing business the way it should be done. Hopefully, as we move into 2002 things will calm down a little bit and we can all work together as a team (carriers/agents/buyers) to work through these tough times in a way that is a win-win for everyone.

We have a tremendous industry, one that is very important to our economy and the well-being of our country. u

What else was happening in early 2002?

US troops invaded Afghanistan in response to 911.