Author: Nancy Germond

We know we're in a hard market, and since so much has been written recently defining a hard market, I'll simply post this graphic that outlines the differences between a hard and soft market.

While many submissions now go electronically, this article will explain more detailed risks that require more underwriting scrutiny. These include risks such as public agency risks where governmental entities require you to respond to their Requests for Proposal. It is these client arenas where your underwriting submission can set you apart from your peers.

We'll review recommended sections that can help sell even the most difficult-to-place accounts.

Cover Letter – Every good submission should include a cover letter. The cover letter should not be generic; it should be an overview of the company you're pitching to the underwriter. This is where you, in a few short paragraphs, “sell" your client to the underwriter.

Outline the strengths of this particular insured, and why that account is a good fit for that carrier. Include items such as these.

• The insured has an experienced risk manager and risk management/safety program.
• The insured has carrier loyalty. Perhaps they've been with their prior carrier for years but are shopping for the first time in a long while
• The insured's claim history is stellar, or they have contracted or hired a qualified risk manager to reduce their exposures.

In your cover letter, state your “need-by" date. Explain, as well, why you're shopping the account. It could be many reasons, including any of the following.

• Prior carrier exited the market
• The client is dissatisfied with the prior agent and has signed a broker-of-record agreement with your agency
• Client is on the verge of expansion and feels the new insurer has more capabilities to assist them in managing their risks

Think of your cover letter as an executive summary similar to one you would find in a white paper.

The Application – Your application must be account specific. Make sure you fill out the application completely, with the correct coding and clear explanation of the operations. Never rely on the underwriter to fill in the blanks, because this can lead to many problems down the road if the underwriter does not understand the account.

Use your agency system to create ACORD apps. If you need to use a carrier's supplemental apps and/or if you are submitting non-ACORD lines of business, be neat and clear. Be sure the Named Insured is verified with the state's Attorney General's website. Be extra sure that the named Insured personally reads, agrees with, and signs each application in the submission.

According to one underwriting expert, underwriters work from the simplest to the hardest. The more organized and easier to understand your submission, the more likely an underwriter won't set it aside for “later."

Narrative – Your narrative is an expanded executive summary. Here are some key points you can cover. However, you must be succinct because “tick tock," right?

Predict any explain any red flags – things that might worry the underwriter, for example, an elderly business owner and provide reassurances, that the risk will have longevity by showing that there is a perpetuation contract with a 42-year old nephew.

• Provide a helpful description of the insured's operations
• Describe other key characteristics such as years in business
• Possible outline future opportunities such as business expansion.
• Management experience (the bench strength) of the company, especially risk management
• Premises, such as we do with COPE (construction, occupancy, protection, and exposure)
• Location(s)
• Employees and safety
• Equipment
• Classification peculiarities
• Dispersion or concentration of values insured
• Applicant's attitude of cooperation and pre-loss coordination
• Insured's web address and any pertinent marketing material published by the company
• Loss analysis/loss prevention worksheets
• Agent's connection or relationship with the applicant. This is important if the agent knows the applicant; it's not just a “walked in off the street" applicant.
• The company's e-mod if positive and you're writing the workers' compensation

With your succinct but thorough narrative, you are selling your client to that underwriter and carrier, because the account may need to go through several layers of underwriting approval before the carriers says, “Yes!"

The Account's Management Team – Here are some of the topics you want to cover about your client's management team.

• Does the owner take an active role in the business? Is management on the premises? How experienced is the management team?
• Loss control efforts, including any property management team that may work for the insured
• Selection and supervision of employees. Strong employment practices, including pre-employment practices, speak volumes. This is especially true in trucking and construction accounts, which are both scrambling for employees and liable to put almost anyone behind the wheel or a shovel.
• A willingness to cooperate with the insurance carrier. The last thing an insurer wants is an uncooperative insured, even in surplus lines.
• Solid record keeping, including
• Accounts receivable
• OSHA 300 logs
• Timekeeping
• GAAP-prepared financial statement

• Reputation/social media. The underwriter will review the applicant's website, Google reviews, etc. Be sure your application aligns with the exposures. In one case, an Arizona underwriter was reviewing an account that rented all-terrain vehicles. The agent assured her that the vehicles stayed in the U.S. and did not venture into Mexico. Unconvinced, she visited the shop only to see a large sign at the back of the store reading, “Mexico ATV rentals). Today, she'd visit the website and search out marketing collateral to review the risk. Know your insured so you don't get egg on your face.

• Financial status
• Accounting practices, such as adherence to GAAP (General Accepted Accounting Practices)
• Problem account? If you can furnish a Dunn & Bradstreet, that's helpful, although the insurer will order one anyway. If this account is in financial trouble, it will be a harder placement, so you'll need to explain any financial difficulties and steps the company has taken to improve results.
• What is the company's philosophy toward health and wellness?
• Does it have a strong non-discrimination statement? Does the organization adhere to all state and federal equal opportunity laws and regulations?

Premises – Here we're back to COPE, so here are a few suggestions about account disclosures.

• Age of buildings
• Maintenance/Retrofitting
• Condition
• Protection systems
• Fire prevention including sprinklers and operative Ansul systems
• Sprinklers
• Construction and design features, including green improvements
• Risk versus exposure, and how is the insured addressing the risk. For example, if the account is in a high-crime area, what security steps has the insured taken to address this important issue?

Location – Some thoughts about location can help, especially in harder-to-place exposures such as single-room occupancy, wildland urban interface areas, etc.

• Exposure inside the premises
• Tenant businesses within the walls of the covered building
• Exposure outside the premises
• Adjacent or nearby buildings and businesses and their risk factor to the insured
• Accessibility
• Emergency access/procedures

Employees – How the insurer manages its employees is an important part of enterprise risk management. Especially when submitting applications for employment liability or workers' compensation, furnish these details.

• Selection
• Pre-employment physicals
• Substance-abuse testing depending on legality
• Driving records
• Background investigations when needed
• Training
• Orientation/onboarding
• Ongoing training
• OSHA-required training
• Experience
• Management expertise in labor management
• Employee expertise/cross-training
• Supervision
• Average ages of employees
• Turnover rate
• Basis of remuneration. For example, many contractors and other business owners still believe they can hire some or all labor as independent contractors. You and the underwriter need to know if this is occurring, because it can be a coverage nightmare.
• Labor relations status if applicable
• Society of Human Resource Management (SHRM) membership. Once organizations reach more than a handful of employees, someone from that organization should belong to and participate in a local SHRM chapter.

Equipment – Equipment claims can impact the commercial general liability policy, the business auto and businessowners policies. Here are a few items to cover in your submission.

• Type of equipment in general
• Average age, replacement, depreciated and market values
• Care and condition
• Maintenance schedule
• Security
• Concentration hazards
• Rules regarding personal use of equipment

Remember that many insurers will send an inspector to review at least the outside premises, and some now use drones. According to Deloitte, insurers use drones pre-loss for “risk engineering and pricing – Aerial site assessments can identify property features that allow the owner either to seek a reduced risk profile or to take appropriate actions to lower overall risk and justify premium discounts."

Warn your client that if they have clutter or their property appears unkempt, this can impact their acceptance.

Safety Culture – Especially in construction, the safety culture of an organization is critical to reducing injuries and third-party liability claims. Is your potential insured addressing these key areas?

• The organization holds safety meetings regularly
• Thorough employee orientation and onboarding, and ongoing safety training. A Travelers study recently found that more than one-third of workers' compensation injuries from 2016 to 2020 occurred during the first year of an employee's tenure.
• Distribution of safety literature
• Accident review
• The organization employs or has an outsourced safety director or risk manager
• Written programs
• OSHA-citation history and OSHA log recordkeeping
• Recordkeeping program

Classification Peculiarities – Explain anything that deviates from what you'd expect to find in that classification.

• Unique conditions of the risk not usual to the class, for example
• Hotel A has a pool, lobby, bar and free-standing entrance canopy.
• Hotel B has a pool, lobby, bar and horses for rent.
• Explain the exposure, but in the narrative, explain the extent of the exposure and the insured's loss control measures they've undertaken. For example, don't let the underwriter say “Neigh" to the horse exposure if you can explain stellar risk management techniques.

Dispersion or Concentration of Insured Values– Locations of buildings are important

• Are all the buildings in one location subject to a catastrophic loss?
• Are all the buildings separated so they are not subject to a catastrophic loss?
• Are you submitting for a blanket or scheduled basis? If blanket, will the insured accept a margin clause?

If five or more buildings are not connected, there may be a commercial lines credit. Not all underwriters know about this credit. Remind underwriter in the narrative that the account qualifies for that credit.

Loss Experience – The applicant's loss history is especially important. Simply furnishing a recent loss run with losses may immediately rule out your applicant. Here are some steps you can take to present those losses in a broader light.

• Loss experience – is it up to date? Are there any claims pending that do not yet appear on the loss run? Don't risk your own E&O or coverage for the insured by failing to disclose pending claims or right to sue letters from the EEOC.
• Carrier's profit picture over the last five years
• The current carrier's historical loss ratio with the account
• Explain “fluke," unusual or outlier losses

Agent's Connection or Relationship with Applicant – How do you know the applicant? Have you handled their account for many years or was this the result of a cold call? Similarly, I'd always disclose if the client is a relative. Of course, the longer you've known the applicants or handled their insurance, the stronger your submission will be to most underwriters.

Other Submission Items – Just when you thought we were through making suggestions, wait, this is important. Here are some other facts that can make your underwriting more likely to accept the risk.

• A list of the client's three-year project completions
• The client's Yelp and Google ratings for service companies and restaurants
• Currently valued, paper or PDF loss runs for the past five years
• While the loss history speaks for itself, consider furnishing the MVRs of all drivers
• Financial statements, which the underwriter will normally request, such as current balance sheet
• Dated and current photos of the property
• Website, product brochures and other advertising collateral
• Typical contractual agreements they enter into
• The company safety manual
• The company's return-to-work (RTW) program. Some workers' compensation insurers will no longer write accounts without a RTW commitment or formal program
• Map your account's locations, especially on coastal risks

Underwriters' Top Ten Pet Peeves

A few years ago, I surveyed underwriters to learn their top ten pet peeves. Here were their top pet peeves, and I only think in this current market, they have zero tolerance if finding any of these issues.

1. Misrepresentations.
2. Illegible applications.
3. Incomplete applications.
4. Submissions submitted to block the market. Be honest about it if that's what you're doing.
5. Submissions sent to the company despite the fact the agent knows that company is not the market for that class of business.
6. Not enough lead time.
7. Way too many options requested.
8. Using the current policy as the template for the application.
9. Not knowing the business operations well enough to submit the application.
10. Using the quote to play one company against another to reduce premiums.

If you become known as a market burner in the industry, it will be harder for you to place difficult risks. Don't waste an underwriter's time. Send an email, call, but don't burden underwriters or waste your time sending apps to companies that will not entertain that risk.

Develop an Underwriting Submission Template

Rather than recreating the wheel when working with complex clients, use this article's main categories to develop a submission template. It will save you time if you start each large submission from a template.

In Conclusion

Your reputation depends on your honesty. When your client has some bumps in the organizational history, you need to be honest yet able to explain them. Every application should be all of the following because your reputation will follow you through the industry, even if you change agencies or venture out on your own.

• Complete, accurate and neat applications build your reputation in the industry as a trustworthy agent.
• Honest, full disclosure with explanations for any changes the insured has made to ensure what happened in the past does not recur. Never leave an underwriter guessing.
• Never fabricate or try to “massage" a class code. Withholding information is a misrepresentation to the underwriter. Don't forget, if you distort information, you not only damage your reputation, but underwriters often tend to paint your entire agency with the same brush.

Provide the underwriter with the “good, bad, and ugly," no matter how it lands with the carrier. The more information you provide, the better the underwriter can accurately price the account.

Virginia Bates, a Massachusetts-based national agency and brokerage consultant, points out that the recent soft market lasted almost twenty years. “Many producers never knew what a hard market was until it hit them between the eyes. Even tenured producers have a hard time remembering how to work in a hard market.

“This is a timely article to acquaint and reacquaint the techniques to get accounts written and renewed in a hard market," according to Bates.

Build Relationships

With more and more business going to surplus lines carriers and wholesale brokers, it's more important now than ever to build strong relationships with underwriters. While we all strive to build our knowledge, we can't know everything there is to know about coverage, especially coverage we don't routinely place. Building strong relationships with underwriters who can guide you when asked will pay big dividends.

While some of these may seem redundant or easily combined, these are the top areas you can address to sell your client to a perhaps reluctant underwriting team. For Big I members, our Hard Market Toolkit is available at this link.

Know the Underwriting Red Flags for That Niche. 

As more and more agents specialize in various areas, here's a tip I learned from an agent. He submitted an application for a non-profit that performed clinical trials. To the underwriter, this translated to "research" and all he received is declinations. Once he drilled down and understood the underwriters' concerns and explained that "clinical trials did not include 'research'" he received four quotes and was able to successfully place the business. Had he known that going in, his submission could have included in big bold letters in the cover letter: "This non-profit does not do research." Knowing and explaining any potential red flags before the underwriter rejects the application can save you valuable time. 

I will end with this quote from one of our Ask an Experts. “Sometimes a submission is putting a bow on a quality package and sometimes it is about putting lipstick on a pig. Drawing the underwriter into the story to [build] a desire to write the account is an important step in the process."

 Last Updated: March 25, 2024

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