Part 2 in a series by Jack C. Randall, CIC, PCLA, PFMM
©2019 Randall Resources Int’l
Got your 2020 reinsurance quoted and placed yet? Since time is of the essence, let’s quickly look at
THREE MORE simple, yet effective GOLD NUGGET SECRETS your mutual can effectively utilize to:
- attract proposals from multiple reinsurers
- get the best rates
- get the best terms
- be offered the broadest selection of programs and retentions!
In my last issue, I revealed and explained these secrets:
- Turn your “talk radio station” from WIIFM to WIIFT!
Use talking points of interest to THEM.
- Get off the bench early– grab the ball– and start playing “Offense”!
Exude confidence and initiative.
- In confidentiality, share your detailed, 5-Year Written Vision.
“Paint a detailed word-picture” of your mutual’s future.
Let’s look at THREE MORE SECRETS in this second issue:
1. Show your practices to identify, reduce, and monitor your “Cat” exposures!
(By “Cats” I’m of course talking potential catastrophic loss events like Windstorm/Hail or Earthquake (“EQ”), not small furry animals!) Cat exposures are major concerns for reinsurers. By proactively bringing up the practices you use to identify, reduce, and monitor your Cat exposures, you set the stage and peak their interest as they observe your company’s professionalism and underwriting expertise in avoiding or controlling unnecessary loss exposures.
Once again, you’re providing solid evidence that you have a firm, conscious grasp on HOW and WHERE you write your business. That’s what they want to see!
Some of the items and practices you may wish to include:
- The latest, detailed Cat model exposure analysis of your mutual. It should include and be able to break out any EQ exposures. (If you don’t write EQ at all, THAT’S IMPORTANT! Be sure to pass that important info along to the reinsurer!)
- An older Cat Model to compare with the newer one.
- A “heat map” showing the physical location of your risks. (Hopefully, it is more north/south shape rather than east/west when discussing Windstorm/Hail concerns!)
- Application requirements that, for each insured home/building, you gather:
- GPS latitude/longitude info. (County, street/address, or zip info alone is too vague!)
- Building construction info. (Wood, brick, block, masonry veneer, steel, etc.)
- A listing of your current Windstorm/Hail deductibles offered as well as EQ deductibles.
- Any recent restrictive limitations on new business for Cat perils like EQ should be noted.
- Your plans to address any lingering risk concentration concerns unique to your mutual.
2. Evidence your 10-year Profitability, separated by Line of Business!
This breakout has the potential to speak positive volumes about your mutual to a reinsurer. If you think of each Line of Business (LOB) as a separate, independent profit center for your company, you naturally want to price, underwrite, annually monitor, and adjust each line so each one consistently produces a profit. Many farm mutuals still, unfortunately, simply lump their whole book of business together and look only at overall profitability. This overall profitability thinking is flawed in that, while the mutual as a whole, may (or may not), be profitable, lines that are not performing and require attention remain hidden for years and do not get addressed.
To a reinsurer, documentation noting Profitability by LOB is yet another great way of showing your mutual’s management expertise as well as setting your mutual apart from the crowd!
3. Evidence your 10-year Growth, separated by Line of Business!
While growth is good, reinsurers want to see what lines the growth is coming from. Farm mutuals who want quality, consistent, and profitable growth, understand the vital importance of monitoring their growth over time by LOB. Here again, only looking at overall growth as a general whole doesn’t provide an accurate enough picture. You must know where your growth is coming from and why. Once you know this, adjustments can then be made as needed.
How should you “measure” LOB growth? While there are many “yardsticks” to measure growth, (policy count, premiums written, etc), tracking growth by Gross Risk In Force is arguably the best means to track growth by LOB for a farm mutual.
Here, I would insert a rather obvious “spoiler-alert” as you compare your Growth by LOB stats to Profitability by LOB stats. In a perfect world, you would be growing only in your most profitable lines.
Sadly, I find many mutual struggling to be profitable, only to discover they are actually growing fastest in their least profitable lines. That’s crazy!
Surely, that’s not the case with your mutual… Right?!
Stay tuned for next month’s blog / audio cast where we will explore even more “gold nugget secrets” to attract more reinsurers to your mutual!
All my best to you,
Jack C. Randall, CIC, PCLA, PFMM
I will be presenting many more points on this very subject on November 11th at the Missouri Association of Mutual Insurance Companies (MAMIC) convention in Columbia, Missouri. I hope to see YOU there!
Want to know more?
- Specific questions about the content of Jack’s article?
- Info about having Jack assist you in creating a Written Vision for your mutual?
- Info about Jack’s other specialized services available to mutual insurance companies?
Contact Jack@RandallResourcesInt.com or call 816-617-4823.