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Here's how to make it in the small business insurance market

Brokers who know how to improve productivity, growth and margins are the one’s succeeding in today’s dynamic insurance marketplace. This is especially true in the small business insurance marketplace, where profit margins are often slim and brokers are continually looking for ways to improve the efficiency of their transactions and margins, while effectively serving the needs of their policyholder clients.

To address the challenges of growth and productivity, brokers are implementing a variety of strategies to drive profitability, and they’re actively measuring effectiveness and making adjustments along the way.

According to a survey of more than 250 brokers commissioned by ACE Commercial Risk Services, conducted in July 2014, a significant number of brokers have developed specific growth strategies for their specialty small commercial business portfolio, while others are implementing productivity enhancement strategies and have profit margin improvement strategies.

While 48 percent of the brokers generated more than $1 million from their small specialty commercial book of business, 20 percent generated $500,000 to $1 million, and 20 percent generated less than $500,000. Brokers generating less than $1 million from their small specialty commercial book therefore may have an opportunity to increase revenues and profitability, provided they have the right strategies in place.

The survey asked brokers about the strategies they have in place for their small specialty commercial book of business. More than half of the respondents said they are increasing revenue by up-selling and cross-selling additional lines of business, increasing web-based rating and servicing to speed up transactions, and limiting the number of carriers they transact with to create buying power for their small commercial clients.

The survey also found that 30 percent or more of the respondent brokers are proactively consolidating small accounts to fewer carriers, negotiating favorable terms and conditions from carriers, and getting binding authority for small commercial accounts.

These results illustrate that brokers are thinking outside the box and using creative approaches that have not typically been used in the past. These innovative ideas are

helping to generate significant revenue and growth opportunities for brokers across the board.

In the quest to maximize productivity, brokers seek to work with insurance carriers that can help to make the transaction process fast and efficient while providing competitive products and pricing across a broad risk appetite.

In addition, more than 70 percent of survey respondent brokers say that the most important characteristics they are looking for from insurers are underwriter responsiveness and price competitiveness.

They also identified quote turn-around speed as another crucial quality. Other important qualities included: breadth of appetite (61 percent), pricing stability (41 percent), financial strength/stability (40 percent) and placement efficiency (38 percent).

Too often though, brokers see carriers only performing well in one or two of these categories, and they find that insurers are often lacking a comprehensive solution for small business. For example, a carrier may offer quote turn-around speed and competitive pricing, but offer no flexibility in working with the broker to solve problems and find creative ways to write business together.

In today’s competitive environment, brokers in the small business insurance marketplace are implementing strategies that they hope can help them not only survive, but thrive. They are focusing on ways to simplify transactions with their carriers, improve productivity, and increase margins, all while maintaining policyholder satisfaction. Brokers want fast and efficient insurer placement with choices to go online or work directly with a responsive underwriter with whom they have a relationship. Most importantly, they need carriers to be flexible and willing to meet them where they are in their efforts to grow small commercial business and service their clients.

David Lupica is Division President, ACE Commercial Risk Services, based in Alpharetta, GA. David Charlton is Division President, Property & Casualty and Micro-business Division, ACE Commercial Risk Services, based in Malvern, PA. ACE Commercial Risk Services is a division of ACE Group providing specialty insurance products for small business in North America through wholesale, retail, managing general agent and alternative distribution channels.

Category: Insurance

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