How to fix inefficiencies in subscription policy sales

While the worst of Canada’s tough market is gradually behind us and COVID-19 takes something of a vacation, all is not rosy, particularly for the commercial liner business.

Brokers have worked tirelessly over the past few years to help insurance company partners explain and sell premium increases to customers when market corrections are required. Agents have reduced the capacity of individual sponsors in virtually all property placements to better spread risk.

Insurance companies have been the main beneficiaries of this hard work. As the market calms down slightly, we must look forward to easier discussions and renewal processes around now profitable trading books.

The brokers handled interest rate and risk diversification issues well. Now transport companies – collectively and individually – need to remove or revise unnecessary and cumbersome rules. These trading barriers now limit brokers’ ability to place trades efficiently and safely.

Perhaps the most obvious obstacles concern network operators’ refusal to follow competitors’ wording and cooperate in placing subscriptions for mutual benefit. Aside from insurance quality and financial valuation issues, this practice is a rabbit hole for the industry. It has to stop.

The real issues are rate, capacity/line and risk quality. Period. And while there could be future court decisions based on the interpretation of the wording, this is historically unlikely. It in no way compares to the advantage that caused this “crisis” – virtually all property risk in Canada is now subscribed and the major airlines have exceptional risk diversification compared to just a few years ago.

Many companies follow the IBC guideline format with individual modifications. Others have proprietary formulations that have been carefully developed using in-house resources. In practically all cases, legal counsel was called in at great expense and expense. There is differentiation, but these differences are hardly material. Rather, there is an inherent consistency in the key criteria of the insurance coverage itself – what is covered and excluded, and more generally underwriting commitment.

Transport companies need to stop these practices and work together. This is more than offset by the requirement to spread the risk component and increased interest rates. Of course, every airline should choose to lead or follow – but at the very least these practices should stop:

• Refusing to follow the formulations of another carrier;
• Insisting on being the main porter (making this a condition of capacity is lazy and unprofessional);
• Insist that your version of a particular disclaimer be used by the main carrier;
• refuse to accept more line than the agreed leading carrier;
• Refusing to move from Lead to a Surplus or Subscriber position;
• insisting on the use of intermediary human resource experts when the placement involves a claims control approach; and
• Charging higher fees for using tax adjusters.

As the market stabilizes, brokers deserve a path to sensible marketing processes that offer a more predictable investment of time and effort.

Douglas Morrow is CEO and Managing Director of Excel Insurance Group. This article is excerpted from an article that appeared in the October issue of Canadian insurer. Featured image from iStock.com/vladru