Your current insurance policy is being non-renewed due to….
You may have received a notice that starts, sounds or maybe feels something like the title above. Insurance cancellations, despite popular belief are actually more common than you would think. They are very serious and should be responded to with action swiftly, but they are not always an awful “kiss of death” from the insurance industry. Some business owners I have worked with seem to think this is so. On the other side, it is something you need to respond with action to regardless.
We will discuss today most common insurance non-renewal or cancellations we see and how you should respond to the scenarios:
…..Your reason for nonrenewal for underwriting reasons
What? Are you kidding me? Yes this is by far one of the most vague reasons, but more common than you think and as an insurance agent this tells me basically no reason why you are facing a nonrenewal. Generally this does mean one of two things. Either something about your operations (claims history, etc) or something in particular about your business makes the perceived risk for the insurance carrier less than satisfactory in their review. It could mean the company has changed their underwriting guidelines as a whole, which just happens to mean your company doesn’t fit with their strategy. Simply put insurance companies generally know what their company is good at and what they are not. Some insurance companies prefer to write roofing companies, but wont write clerical offices. many are just the opposite. Most companies fall in the middle which is why this becomes very common.
For Example: Transportation claims have been a leading cause of claims for several years, especially relating to workers’ compensation insurance. As a result in the last few years several insurance carriers who in the past would write these types of accounts have now decided they were no longer offering coverage for companies in your industry or class code. For some insured’s its no surprise when their claims have shown them good reason for this, however some trucking companies who have done well at controlling claims would see non-renewal notices for this type of reason. They were not seeing the non-renewal because of their claims or experience, but more because of the industry as a whole not performing well. This can be discouraging for these types of clients. Clients who take pride in controlling their claims and being very marketable risks to insure. These are the types of clients who need an experienced insurance agency on their side. Preferably one with several market alternatives to move to when this happens.
What to do?
Discuss with your independent insurance agent what other carrier options are available. Start this process soon so you can make an informed decision on the direction you want to go without being pushed into a last minute decision. Requesting claims history reports and Experience rating worksheets from companies you have been insured with for the last 5 years is a good start as most companies will need this in order to quote.
Nonrenewal because Agent is no longer representing this insurance carrier…
Insurance companies and agencies have contracts come and go fairly often. More often for some agencies than others. This doesn’t mean your agency is not a good agency or that the carrier you are insured with is not a good carrier to do business with. It just means that one or both of those parties have decided they are not the best partnership at this time. This decision has absolutely nothing to do with you as the business owner with the exception that you are part of the pool. Agents within the industry call this the agents “book of business”. Sometimes, for one reason or another, the agency or carrier has decided that the partnership does not fit one o f their needs at this time.
What to do?
Decide who you like more. If you have not been happy with the agency, call another agency. Especially one who has access to several commercial markets. A lot of times your policy could be moved into another agency book with a just few forms signed.
If you like the agency more than you like the carrier, discuss with your agent the alternatives they have to offer so a replacement option can be found well in advance of your renewal date.
Nonrenewal due to Claims or Non-Renewal Due to payment history issues
Don’t be discouraged. We all have set backs and things come up with payments. Insurance claims are the reason we buy insurance. These statements are not to enable you to continue on your path, don’t beat yourself up, but action and change is needed in these situations. Otherwise you are going to see the same situation in the future.
What to do?
Nonrenewal due to payment issues are a sign that you want to look at things. You might have an accounting back-log or issue that’s delaying your payments (Fix the back log issue and prioritize making payments on time). You might have cash flow issues from high accounts receivables (manage this aggressively-maybe even consider outsourcing to a collections agency if need is to that extent). Your sales are just low throughout the year or part of the year (work to improve sales or drive down costs more aggressively-most importantly budget for your known operating costs like insurance). These are the most common reasons we see cancellation of insurance. The seriousness of this issue extends into all aspects of your business and is a reason why several studies point to poor accounting practices as a leading reason why many small businesses fail.
A Non-Renewal due to claims do happen often. There is really no one answer to how to handle these because the scenarios are always different. Some carriers are more aggressive than others. Some are more reactive while others are more proactive. This is really where having an agent that understands these differences in carriers is vital to helping diagnose the best game plan for your business. For instance, if you had one claim that blew up into a much bigger issue and you have made the necessary corrective actions, most of the time that is not going to be hard to overcome in finding a competitive replacement for coverage.
But when you have shown a trend of several claims, either big or small, corrective action must be taken. If these incidents have similar reasoning than from the carriers perspective it may point to poor claims management. If sufficient corrective actions have not been made than the claims are likely to create the same or worse problems for you in the future. These types of issues must be addressed or the problem with claims and obtaining insurance will get worse over time.
Overall a nonrenewal of your insurance should not be taken with a grain of salt, but are also not a reason to close your business. The issues are sometimes within your control and many times they are something no one could prevent. The key to is to manage and react promptly. Get past the problem with a well thought out game plan. The help of a good agency is crucial to deal with these problems for your business.