Preparing for Storms

I live and do business in Tornado Alley and storms happen so often they almost seem like background noise.  Until they wreck your house!

In my last post I mentioned a few things which indicate that the U.S. property and casualty insurance industry may be headed for stormy weather.  I hope that you won’t view that the same way we in Oklahoma sometimes view tornado warnings…

It’s smart to prepare.  So, what can you do?  Here are a few ideas:

1.       Pay attention to your insurance company financial ratings.  You can do this in the trade press, by subscribing to A.M. Best or simply asking your carrier representatives.  If a company you represent receives a downgrade ask questions about how this will affect your business and customers.  Make contingency plans for moving the business somewhere else.  Consider whether or not you want to continue to place business there until things change.

2.      Make sure you have spread your business.  If you have a company which suddenly cuts off market access because of financial trouble, or receives an unacceptable downgrade, or becomes insolvent you don’t want to have too large a share of your business with them do you?

3.      Consider what Service Center usage may mean.  If you have business in a company service center (and I’m a big fan of these) and that company experiences an insolvency do you have back up information so you can continue to service your customers?

4.      Maintain or develop a good mix of carriers.  This is a cousin to #2 but not quite the same. In difficult times like these it’s a good idea to have more companies rather than less.  But, it’s also more difficult to get a contract in times like these.  Frankly, its times like these when it’s a real blessing to be a member of OAA and SIAA where we have no shortage of carriers.

It’s tempting to just ignore what’s going on in the bigger world around us.  We’re busy.  Bad things don’t usually happen.  But such attitudes make about as much sense as not buying insurance!  I’m not trying to be an alarmist.  But I do think it’s wise to be prepared.

In the 1990’s we had a significant book of business with one of the oldest, most respected and stable insurance companies in the country.  Their A.M. Best rating was A+.  Suddenly, a negative outlook report was issued and the rating fell, as I recall, to A-.  We pulled all our customers files that were insured there.  Before that was finished – days really – the rating fell to C.  We worked hard to move all that business before the receiver was appointed.  It almost happened overnight.