As agents we don’t like to write Excess & Surplus lines business if we can avoid it.  The commissions are much less, there is no profit sharing, we have higher expenses in quoting, issuing and servicing the policies and the forms are non-standard increasing our E&O risk.

E&S looked at this way pretty much sucks doesn’t it?

I’m certainly not going to try to change your mind about this here.  But what I’d like to do is give you some suggestions for at least increasing what you get paid when you have to write it and some suggestions for lowering your expense factor.

The first thing I recommend is to use a premium finance company that you select instead of the one the broker recommends.  Premium financing is extremely lucrative and the finance companies are very willing to pay someone for the privilege of financing the premium.   They are either going to pay the E&S MGA or you.  Probably not both.

Use your own finance arrangement.  If you do much of it you can negotiate an override of a point or two that has nothing to do with marking up the customer’s rate.  This “point or two” is very significant as it can represent 10% to 15% more revenue to you on each policy.  Or you can let the broker have it.  It’s your choice.

You can also mark up the rate yourself.  Many savvy agencies do this with some rate mark ups as high as 5%.  This can result in another 10-20% increase in revenue.  Some agents think customers will object but I’ve never had a customer, in nearly 20 years, refuse a premium finance agreement due to the rate.  I simply show them the relatively small dollars of the interest portion, invite them to pay cash or use their bank line, and watch as they sign the contract.

Another important thing to do with E&S is to concentrate your business in one or two MGA’s.  When you give them more of your business you can ask for and receive more commission.  They are getting 15-25% commission and paying you 10%.  They have room and they will pay more if it’s worth it to them to get your volume.  Spreading your business all over the place doesn’t pay.

Use MGA’s with online quoting and rating capability.  This is becoming wider spread.  Doing it the old way costs more money.  Quit that!

Charge fees.  State laws vary but you can generally charge fees if you don’t receive commission.  Work that out with the broker and set your compensation.  Even if you want the commission many state’s laws allow you to charge a few that covers your cost of services like tax filing, certificates or other things.  Of course you need to disclose and you need to be worth it to the customer but this can add a lot of revenue.

E&S will probably never be as profitable as standard business but the gap between the two can be a lot smaller than it is for a smart business person.

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