For the past 18 months now virtually every business, in every industry across the globe has experienced dramatic price increases. This cost is further compounded by materially higher deductibles, reduced limits and far more restrictive terms and conditions. The effects have been devastating to even the most profitable company’s balance sheet.
The “Hard Market” that clients are experiencing now is indeed the worst of any cycle seen in the past 40+ years!
The factors influencing the current conditions are widespread, bona fide and profound. They include record-setting catastrophic claims emanating out of climatological/hydrological natural disasters, large securities litigation, Social Justice & Civil Unrest, #MeToo, #BLM, Environmental, Social and Corporate Governance (ESG), enormous cyber security losses/ransom demand payments, and thousands of Covid business interruption and health related claims. This is all topped off by the lowest sustained interest rates in history preventing carriers from making even the most conservative return on their investment dollars.
Indeed, every line of insurance has been affected and the consumer clearly feels the burden.
CRS is an independent risk advisor to over 100 sponsored funds, along with several hundred portfolio and standalone companies. From start-ups to the Fortune 10, we serve as a trusted advisor across the risk continuum. CRS can confirm that while it is an extremely volatile insurance marketplace, sophisticated clients have shifted their focus to their total cost of enterprise risk. The discussion has shifted from “Are you solving for the most catastrophic risks or still trying to manage risks at ‘dollar one’?”
While the insurance coverage itself is intended to pay in the event of a claim, defense, administrative expense, and brokerage commission are often included in the total premium.
It is generally thought that when retail and wholesale brokers are paid via commission this compensation component is already built into the premium by the underwriter and there is no way for it to be amended or reduced. While this may be the case in some rare instances, especially when minimum premiums are needed, it can be quoted on a net basis.
Clients should be aware of the actual number of service hours that are required to deliver a successful program. Suffice it to say everything in a service industry ultimately breaks down to an hourly rate per person. Correctly establishing the actual hours needed for specific tasks, and by whom, is critical. Remuneration varies by skill level from the those issuing certificates and ID cards to high ranking actuarial, risk advisory and claims personnel. Hours credited to engineering services that go unused or unneeded are simply wasted dollars.
An hourly rate comparison just among the 4 largest brokers varies at the lowest hourly levels by less than 2% to more than 48% at their highest. Multiplying that out across multiple service categories can be eye opening. By getting those numbers right, and then benchmarking them amongst their peers/competitors, a client is empowered and can purchase a product that they now know is market or better.
The best insurance programs we see are built upon alignment of interest, strong thought leadership and sound fundamental foundations. Ultimately, the more a client is armed with tools to mitigate cost, maximize protection and manage insurance advocates, the better they’ll perform against their competition.
It’s a complicated industry in a complicated world and we’ve only scratched the surface, but that is our mission. To drive transparency to our clients’ doorstep, provide strong thought leadership and lend a helping hand along the way.
CRS is an independent advisor across the risk continuum, navigating clients through the otherwise opaque insurance marketplace.
If you want to learn more, give us a call: 212-686-4111