Improve Your "Ask" to Optimize Insurance Pricing and Terms

MARCH 1, 2022

Premiums continue to increase for certain lines of property and casualty insurance, while coverage and terms become more restrictive. Taking control of the marketing and placement process allows insured organizations to establish the “ask,” drive the process, and obtain optimized coverage, terms and pricing from the insurer.

There are two approaches companies can take to this issue:

• Passive approach: Insurers, if left unchallenged, will drive pricing based on their data, rates, analytics and directives.
• Active approach: Insureds can pre-underwrite their risks to proactively drive the placement process.

An inaccurate ask (or none at all) to the insurance marketplace can lead to coverage that is both inadequate and overpriced. With a tailored communication strategy, we have found that insurance costs typically drop between 10% to 25%. The key to success is a finely tuned marketing and placement process based on data and risk analytics.

The Power of Data to Drive Pricing

Organizations can use data to drive favorable insurance outcomes, using the same tools and analytics used by the insurer and creating a narrative that is both accurate and more favorable.

Insurers will drive pricing based on: their own data on established rates and ranges, company directives and industry data. 

Insureds can use data to drive their best outcome to: explain and demonstrate how they differ from other insureds, start negotiations with a target in mind, earn the reward they deserve for their good loss experience and keep negotiations factual instead of emotional in challenging situations.

The rising costs of insurance across all lines highlights the importance of an effective placement process. In 2021, primary general/product liability increased by 10% to 20% year-over-year and is forecasted to increase an additional 5% to 15% in the first half of 2022, according to USI’s 2022 Commercial Property & Casualty Market Outlook.

Claim costs are going up for various reasons, such as:

• Social inflation
• Nuclear verdicts
• Increasing frequency and severity of catastrophic events

These trends impact underwriters’ perceptions of rate adequacy and underwriting profitability. Higher premiums, reduced capacity, more disciplined underwriting practices, and more restrictive terms and conditions are impacting many business sectors. These conditions further justify an active approach to insurance placement, rather than a passive one that allows underwriters to set the starting point of negotiations.

Case Study: Taking Control of Insurance Outcomes

One of our clients engaged us to conduct a comprehensive analysis of its loss history, loss projections, and current program structure. This revealed that though its premium pricing was competitive, its current limits were in the low range compared to those of its peers. We also carefully reviewed new and existing policy language, including terms, conditions, limits and exclusions (such as infectious disease exclusions), to ensure that the intent and wordings were clear, and all loss exposures were addressed.

As a result of this analysis, the client was able to recommend to its board that umbrella limits be increased to $10 million, delivering a lower cost structure, as well as retentions and limits that matched its risk exposure. The client’s buying decisions were based on analytically developed financial information instead of underwriter quote comparisons.

Take control of insurance placement: Learn how to establish the ask, drive the process, and obtain the best available coverage, terms and pricing. Email pcinquiries@usi.com or contact your USI consultant today.