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Friday, Jan 27, 2023
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Insurance Industry Stands Up to 2021’s Challenges

Increased interest in life insurance, a “hardening” insurance market and the importance of cybersecurity coverage characterize the insurance market in 2021, San Diego industry executives say.

The insurance market has been hardening — that is, prices have been rising and some coverage is becoming more difficult to get. The Insurance Information Institute reports rising prices across commercial lines since 2017.

“The insurance marketplace is hardening. The commercial auto market has been hardening. Other lines of management liability coverages are as well. Specifically, Directors and Officers coverage,” said Byron Johnston, president of Teague Insurance Agency in La Mesa.

That trend, however, may be near an end for some forms of insurance.

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“There is evidence of a plateauing of pricing across some of the lines of insurance that should result in a more balanced insurance market by late 2021,” says a recent report from Marsh & McLennan Agency.

The trend toward increased prices is not uniform. “Workers comp is pretty flat right now; we’re not seeing an increase or decrease,” said Trindl Reeves, chief sales officer with Marsh & McLennan.

Several insurance executives said the current assumption under California law is that if an employee contracts COVID-19, it probably happened at work. That’s not a fair assumption, they said.

Businesses would do well to have a strong COVID mitigation program, said Jamie Reid, chairman of C3 Risk & Insurance Services in Mission Valley. “Workers compensation is relatively flat, but the impact of COVID is yet to be seen. Workers comp has a long tail so it may start adding costs back into the workers comp system and force rates up.”

Preparation is key for those going into the market for insurance. Reeves said clients need to ask themselves two questions: Do I have the coverage I need in the current environment? And do I have it at the right price? She said her business has been seeing chief financial officers who have not budgeted for increases.

An absolute rule in the current climate is to shop early, Reeves said. While in the past, people could go into the market 45 to 60 days prior to renewal, the planning process circa 2021 has to begin 180 days out.

“Now if you’re late, some people won’t even quote [a price]; they’re just buried,” she said. “You have to be early.”

Underwriters Measure Risk

Insurers may ask for a lot of information. Being transparent with an insurance company is just as important as being early, said Chip Stuart, chief sales officer for Hub International. If one leaves out important information when discussing their situation, it’s likely that an insurer will “fill the void with premium dollars,” he said wryly.

Underwriters want to know how they will make money on a risk. They want to see a business continuity plan and want to know, if a business sustains a loss, just how that business will minimize the loss.

Cybersecurity insurance is a must, he added, when weighed against the damage a cyberattack can do to a business. Similar to kidnap and ransom insurance, a business in trouble can bring in cybersecurity professionals who know how to negotiate with shady characters, and identify whether the threat is merely a hoax.

Chris Reese, senior vice president and cyber and technology practice leader – Pacific Series with Lockton, said her company helps clients improve their cybersecurity with technical tips which, at the same time, help them qualify for better insurance rates.

“We at Lockton, we’re not IT security people,” Reese said. “We look at claims data and best practices through multiple sources.” From experience, Lockton can advise businesses to use multifactor authentication for all remote access to a company network. It also recommends endpoint protection; CrowdStrike software is one example of a best-in-class tool, she said.

When it comes to cybersecurity incidents, “The reality is, 90% of what we read about in the paper is self-inflicted,” Reese said. That is actually good news, because businesses can take control of the situation. “There’s a lot we can do to better protect ourselves,” she said.

It can be a tough road for clients, she said. Is it worth it? “Oh, absolutely,” she said.

Not Your Usual Purchase

Insurance is a unique product, said Jeff Cavignac, president of Cavignac, an insurance brokerage with its main office downtown. People pay hundreds of thousands of dollars on something they hope they never have to use.

Actually it takes more effort than hoping. As in the cybersecurity example, those who insure their businesses should look for ways to manage risk.

Reeves, with Marsh & McLennan, said that in many instances an insurer will have concrete advice on operations. For example, it might say it really needs a client to change the way its inventory is stacked in a warehouse.

A lot of brokers simply sell a product and react to questions, Cavignac said. By contrast, a professional broker takes a more active role, not only working with a client to manage risk but negotiating with an insurance company to get proper coverage at the lowest realistic price.

Reeves said there are creative ways to design coverage, adding that a big company like Marsh has lots of options for clients.

A Change in Attitude

The atmosphere in insurance sales is not the same as it was in previous years.

Prospective clients are more receptive and have a lot more interest in the subject, people who work in the industry say.

With COVID in the news every day, “people are a lot more eager to talk to us, meet with us,” said Nash Subotic, CEO of WestPac Wealth Partners in La Jolla. Since Subotic’s company specializes in wealth management, his insurance focus is primarily life insurance — an important tool for business owners and for keeping wealth in the family.

Life insurance is a powerful tool, he said. One handy thing about it is that it has a cash value. Subotic said he has seen business owners borrow money against themselves, getting millions of dollars. There was a lot of activity in the second quarter of 2020, he said.

It was good thing, he said, because that’s what insurance is for: emergency funds.

“Life insurance is the No. 1 estate planning tool,” added Tony Steigerwald, president and CEO of Dunhill Marketing & Insurance Services Inc., a Mission Valley business specializing in life insurance and annuities.

“Younger couples are seeing about buying insurance,” Steigerwald also said. Unlike past years, people age 35 who have their first child are “not feeling invincible” in the current environment. The executive said he is seeing increased business.

People used to procrastinate. “Now all of a sudden they’re calling agents,” said Steigerwald.

The times make potential customers consider the benefits of life insurance, said Myron Jucha, CEO of BJA Partners, an insurance brokerage that also offers financial services. “I think people are much more aware of what insurance can do [when they see the world is] in a crisis.”

The Role of Federal Policy

Steigerwald sees business ahead. With a Democrat now in the White House, he said, life insurance sales are poised to go up.

That is because the federal estate tax is not as likely to be as generous as it has been under a Republican administration. Specifically, the portion of the estate that is left untaxed is likely to shrink. It may happen as early as 2022, he said.

With the government tax authorities poised to change, families buy life insurance policies to spare children from liquidating an estate to pay federal taxes.

“Insurance business will go up — it’s that simple,” Steigerwald said.

People are buying more insurance, said BJA Partners’ Jucha.

Selling insurance in 2021 takes a little more work, he noted. The CEOs, CFOs and human resources specialists that make up his potential customers are all working from home. The team at BJA Partners makes an attempt to reach them via personal email addresses and cell phone numbers.

But he said he has found something interesting. If a salesperson gets over the wall and contacts an executive at home, that executive seems to be more receptive.

Perhaps it is because insurance is tied so closely to domestic life. “Insurance is about family,” Jucha said.

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