Loss Ratio Issues Continue

[nyc2phi]

Ok so some of you know I've ran into some issues early on with my loss ratio and it seems to continually getting worse.

I'm not having an issue with frequency of claims more so severity. I have two claims with reserves over 100k and a few slightly less then this.

One issue has been with PIP claims and I've made adjustments by no longer writing NYC business.

My questions are is there anything else I can do to reverse this trend and could there be any repercussions from my carrier like commission drop or possible loss of contract?

I just entered my second year.

 

[FL P&C Broker]

Can you see anything in common with the policies that have excessive losses? Maybe low limit clients or low deductible?

 

[djs]

Loss ratio issues in the first couple of years happen. You don't have enough business to absorb 1 or 2 larger claims.

If its not frequency or claims that happen within 60 days of policy issue, you probably don't have a big problem.

I would talk to your carrier reps though. If there are concerns in your book, they will usually let you know and work with you to fix it if you bring it up. If they have to bring it up, the conversation may not go as well.

Dan

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One issue has been with PIP claims and I've made adjustments by no longer writing NYC business.

Rules may be different in New York, but here, you may be walking a fine line of 'redlining' which isn't allowed. If someone walks in your office (or calls you) and you can write the business, you can't reject it based on their location. Doesn't mean you have to market into those locations, just can't refuse to write it.

Before you say it, yes, I know carriers do it all the time, but they use other ways to get around the rules.

 

[insurance1822]

I know the feeling because in the back of your head you feel like it threatens your livelihood. Frequency would be more of a concern to the carrier. I know some agents who have persistent loss ratio problems (located in PA near the NJ border..) because they're writing the new yorkers buying homes in the pocono area & still fully commuting to NY/NJ every day. As you know when they have an accident in NJ the PA carrier has to follow NJ rules which leads to bigger payouts. I think your first step is a smart one.

Are these losses occurring in pricing/tiers that Erie doesn't necessarily want? That's the only way I could see them pushing back. Kemper talked trash to me over loss ratio & here's how it went..

Kemper rates people A-Z (A's the best Z's the worst..) and when we got appointed our rep didn't even tell us this. We got w/ SIAA...got the appointment & started writing business. After the 1st year our loss ratio was around 90% and we definitely had a frequency issue. Turns out most of the claims were in those lower tiers. End result? They had a conversation w/ us to stop writing those lower tiers w/ them. Our loss ratio problem w/ them continued to be poor year 2 but we issued NOBODY in the tiers they asked us to avoid & I actively marketed the lowest tiered people off their books. They now understand that we're committed to them, to profitability & to keeping the book clean. I had 3 packages non renewed due to claims & it showed the UW and rep that I'm committed.

Our loss ratio w/ them sucked again this year & they didn't have any problems w/ it. That hailstorm crushed us & it was a direct result of that. Our book is full of the business they want & it followed the company's loss ratio trend for our market for this year.

Keep an open line of communication w/ your rep, show that you're avoiding the bad tiers, keep writing packaged 100/300 multicar married homeowners, avoid people traveling to NJ/NY & reach out to your underwriter (while CCing your rep..) when you have an account you want off the books. Stacking the cards in your favor like should surely keep their claws away (at least it did for me..)

Again if they see your book is written w/ the business they want...claims are out of our control. From what I've seen when an agency experiences consistent loss ratio problems the carriers will put underwriting restrictions on them 1st. So long as the agency complies it should eventually work itself out.

 

[djs]

Good summary ins1822

The other thing to keep in mind is if your loss ratio is out the door, but your risks were properly underwritten when placed, the carriers tend to accept that more then when your risks are rated incorrectly in addition to your loss ratios being bad. Sometimes, losses happen.

True story.... I wrote a house, which had a prior water claim on it. Bound coverage, it met all guidelines, no issues, or so I thought. Because of the prior claim, the carrier did a subsequent driveby inspection and immediately flagged the property. Threatened to pull my appointment over this due to poor underwriting. I scratched my head.....

I had them send me their inspection report. I looked at the pictures and was really thinking I had inspected the wrong house, but the pictures just didn't make sense. Turned out, the carrier inspected the wrong house, not by a little bit either. It was about 400 miles away. I've had a lot of neighbor houses 'inspected' before, but never anything close to this.

In the end, the policy was 'uncanceled', my appointment was not at risk but I think some inspection company lost a contract. The client was very upset with me, but he kept the policy since it was all he could get at a reasonable premium.

Moral to the story..... things happen.

 

[nyc2phi]

Appreciate your help.

I am going to reach out to my rep and express my concern as you both stated.

I am not redlining NYC however being licensed there I do get referrals from there. I have a gift card program that entices referrals so I am going to cut that program in NY which should lower if not completely end placing new business in NY.

As for commercial my three largest claims have all come from one industry (pharmacies) so I may start targeting other businesses commercially.

Thanks again

 

[AZDave]

You would think they would look at the big shock losses and throw them out, and look at the account, individually. It qualified, you wrote it.
What they do in the future, who knows. All carriers seem to have a 'program' that some higher up developed to make their job secure.

Last year I was put on a program by State Auto for three year totals. Never mind 2013 ended at 54%. Never mind that 2010 included a hail cat loss. Never mind two shock losses over $100K (both UM).

Their program for making my agency profitable: I was not allowed to write an unsupported auto policy and no state minimum bi only auto's. Crazy since I had zero of that business on the books with them!

Oh well. Just go with the flow and tell them what they want to hear. This year I ended under 50%. I'm sure the underwriter who made up that program will bring that to his boss and say, 'see how my program turned this agency around?'.

Good Luck and Good Selling

Dave

 

[1manshow]

some good advice shared

i'll add what i know about your main carrier

the underwriter's input on your agency has substantial influence
the dsm also has a vote to cast...for or against
the branch manager has the authority to terminate or reduce comissions

keeping these people in the loop when re-underwriting and asking for advice to help make underwriting decisions can help strengthen the relationship

 

[nyc2phi]

Appreciate it all very much.

I've certainly learned a lot here and from my first year in business.

I am going to do my best to get this turned around

 

[Arnage150]

Very good info. Most items were covered above.
I can add that commercial lines always outperforms my personal lines business when it comes to loss ratio. Try to write more commercial business. The pharmacies sound like dumb luck.

As mentioned above as long as you are following the companies guidelines and not manipulating business they can only get so mad at you. The first few years look bad as you have no volume to offset the large claims. I had two claims this year over 200k each with two of my main carriers and was still able to keep my loss ratios under 40% with both because I had the volume to offset them. That takes time tho. U'll get there.