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Here we go again . . . or so it seems. Underwriters are sharpening their pencils and talking about the one that got away, agents and brokers are dickering about pricing rather than simply swallowing nominal increases, clients are hinting at better deals to be had from un-named competitors, and we are finally seeing some action in the new business development arena.
Are we at it again? We are midway through our second renewal cycle in this hard market, are we poised to plummet back into the irresponsible madness of a runaway soft market? Is competitive pricing going to once again upstage sound underwriting, program design, and loss control? Someday, perhaps, but not this day.
What we are actually experiencing is a healthy and natural segmentation of the market place, a movement in the direction of reasonable and appropriate account underwriting for preferred risks and away from across-the-board increases that characterized the past two renewal cycles. Now that almost every carrier has scrubbed their book of business, purging themselves of poor performing and out-of-appetite risks while re-underwriting those that they wish to retain, detailed appetite guidelines and specialty market niches have been carefully defined for each product line and business segment that these underwriting teams wish to target.
Of course, no desirable target market is going to be exclusive or unique, so . . . where there is overlap, there is competition. What’s the difference between this type of competition and a soft market? First and foremost, there are fewer players involved. In the past, we may have expected a multitude of national and regional carriers to hotly contest the mere suggestion of an opportunity. Now, we find that only a few carriers will respond favorably to new business submissions and they will only do so if the account matches up well with their appetite and specialty. Further, accounts that have performed well, have a consistently low loss ratio, and proactively engage in risk management and loss control programs seem to be the target of the heaviest competition while those that appear riskier and less advanced tend to spark less interest. Simply put, gone are the days when the markets were trying desperately to be all things to everybody, foolishly writing whatever they could grab at whatever price they could get. These days, “good accounts” get good pricing and tougher accounts will take a hit.
Finally, you have already witnessed the unbundling of packaged offerings (especially those that include worker’s comp.) and are now finding diverse levels of competition amongst various carriers for specified lines of business on any account. This trend back to mono-line underwriting inherently means that many of our middle market commercial programs will be constructed piecemeal rather than homogeneously.
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