Whether or not the critics can agree on when (or if) the Hard Market is occurring, one thing is certain: Customers are shopping around and demanding more quotes due to rate increases. $38.6 billion in Property and Casualty Catastrophe Losses in just the first nine months of 2011 have helped the carriers (FINALLY) take action for the fact that rates are too low to maintain profitability. In the Midwest, we’ve seen the most dramatic action taken with Personal Lines property. Rate increases, deductible increases, and property exclusions are creating reactions from customers when they receive their renewals.
While increased rates mean agency income, how do we maintain solid retention with potentially upset customers? Explain to them the truth of the situation…
“The truth is that every carrier, including the lower priced carrier right now, will be taking rate increases in the near future, and you have value in the policy with your existing carrier. You have longevity (loss history) with your current carrier, but not with the new carrier. If you have a loss next year and the new carrier looks at your loss experience, it would be very negative since you’ve only had one year of premium prior to the loss. This bad profitability factor (loss ratio) could cause the new carrier to cancel your policy. If your policy cancels, you will be facing much higher premiums than your current carrier and situation right now. It’s best for you to leave your policy where it is until the market stabilizes for the sake of your future premium costs.” This seems to be working for our agency, but how does it work for yours?
– Josh Nordin