The independent agency channel places 62% of all property & casualty insurance written in the U.S. and 87% of all commercial lines written premium, according to the Big “I" 2024 Market Share Report, which compiles and analyzes p&c premium data from AM Best.

Agents need carriers and carriers need agents. It's a symbiotic relationship that puts insurance into the hands of the businesses that need it. However, the hard market is putting a strain on relationships across the insurance distribution system. From the client who is unhappy with their premium at renewal to the carrier that cannot get rates approved by the state regulator, day-to-day business in insurance is fraught with friction.

The cost of commercial insurance has risen by 6% per quarter for more than two years, according to WTW, while insurers experienced their worst underwriting performance in more than a decade in 2023, according to AM Best.

The hard market presents various challenges for independent agents. However, by offering more value, doubling down on relationships and increasing collaboration with clients and carriers, agents can continue to adapt and succeed. But with the pain of the hard market set to linger into next year and maybe beyond, some friction between agents and carriers will remain as well.

This friction can be manifested in rapidly changing appetites, varying underwriting restrictions and significant premium increases. Further, despite a history of sending good placements, patience is tested when agents are greeted by carriers being more selective about the risks they accept and taking longer to review submissions and make decisions.

“Rate increases, the legal environment, high reserves, social inflation and things of that nature are definitely putting a strain on getting competitive numbers out to our clients," says Jeff Kroeger, head of commercial lines at World Insurance Associates. “With our most significant relationships—carriers where we place our most significant premium volume—it is a strain, but our key trading partners want to hear from us."

The strain can turn into frustration, which has the potential to upset the applecart of agency-carrier equilibrium. But through professionalism, communication and transparency, agents can preserve their carrier relationships and enable them to support clients. Further, understanding the overall market provides context to the hard-to-swallow decisions that carriers are making.

 In 2023, the U.S. p&c insurance industry recorded an underwriting loss of $21.2 billion, according to AM Best. If those numbers make your eyes water, perhaps the fact that the number was actually an improvement from 2022—when the industry was hit by $24.9 billion in losses—will force a tear to roll down your cheek.

These losses prompted AM Best to deliver 39 downward credit rating actions to U.S. personal lines insurers in 2023, more than twice the number registered for 2022. They also downgraded 15 commercial insurers and one reinsurer, which handed the U.S. p&c insurance industry a total of 55 downgrades in 2023 compared to 30 in total for 2022.

 “Our goal is to avoid ever having to exit a new business," said Haley Meisner, senior vice president of independent agency distribution strategy at Liberty Mutual, on “Young Agents Take On the Hard Market: Working With Carriers," an Agency Nation Radio podcast episode. “That means we are taking all of the extra precautions we need to ensure that we have a product in the market for our agents to rely on."

“We are verifying every single discount that we're applying, and we're doing extra verification pre-bind. That means more manual underwriting, which is a more expensive way of doing business, but it is worth it to gain an understanding of what we are writing," Meisner continued. “I've been so pleased with seeing the partnership between the carrier and the agencies ... because, as agents understand now more than ever, these extra steps mean that we have a long-term, viable product in the market that you can trust and rely on."

The Path Forward

Last year, Deloitte published the article, “Differentiating distribution to boost middle-market commercial insurance partnerships and production," outlining the results of a survey of insurance agents and brokers. “The challenge facing many insurers in this rapidly evolving environment is how to differentiate beyond price and coverage to maintain and grow their middle-market business," Deloitte said. “This should prompt many insurers to rethink their distribution relationships and consider new strategies to not only lock down their most reliable producers, but also to target and develop those with the potential to become longer-term partners."

With the hard market forcing premiums higher and coverage to be limited, the study outlined these five areas that carriers should consider when examining their distribution strategy with independent agents and brokers:

1) Strategic alignment. How a particular agent or broker supports the company's goals, what the carrier could do to support the agent and broker, and why they should do business together.

2) Enablement. How the carrier can use technology, infrastructure and process to help agents and brokers raise their game.

3) Data-sharing. How carriers and agents and brokers can come together to harness data to generate insights for decision-making, segmentation and product customization.

4) Customer-centricity. How carriers receive feedback from the client via the agent or broker to improve the customer experience.

5) Synergy. The ways that relationships are built to create value and long-lasting relationships to help both parties grow together.

The survey also, unsurprisingly, found that relationships matter when syncing agent-carrier distribution goals. When asked how to characterize their relationship with the carriers that they place the most business with, 45% of agents and brokers described it as “collaborative," which was defined as “often working with insurance carriers on planning and go-to-market tactics to grow together and maintain strong relationships, regardless of temporary shifts in market conditions," while 33% referred to their relationships as “strategic," which was defined by the “development and maintenance of long-term strategic partnerships with carriers, regularly exchanging data and market intelligence."

Unfortunately, 21% characterized their relationship with carriers as “transactional," which was defined as placing business “based primarily on price and coverage considerations, and generally do not maintain longer-term partnerships."

A key element of a collaborative relationship is transparency, with communication serving as the bedrock. For agents, one example involves “giving a company the expiring premiums if they're competing on some new business," says Micah Salas, senior vice president at Christensen Group Insurance in Eden Prairie, Minnesota. “Without that, why would an underwriter want to waste their time on a submission?"

Also, in the common instances where an agent is remarketing a risk, Salas makes sure he is upfront with the underwriter so that they aren't caught off guard if they lose a client. “When you are shopping an account, tell the incumbent carrier that there's going to be competition and say, 'Hey, really come with your best price.' Saying something like that shows that you're not just pulling the rug out from underneath them."

Additionally, with underwriters' desks overflowing with submissions, it is crucial for agents to “present well-prepared applications with clear value propositions for the carrier" and “maintain regular communication with underwriters, keeping them updated on client developments and proactively addressing any potential concerns," says Bill Allen, president of middle market property & casualty, The Liberty Company Insurance Brokers.

With dynamically changing rates, underwriting guidelines and appetite, companies such as Liberty Mutual have created online tools for finding out how a renewal might shape up. These tools summarize how and why the price is changing, as well as discounts such as telematics or paperless billing for personal lines accounts, that are available to reduce sticker shock.

“The better you retain your book, the better we retain our book, we all win," Meisner said. “The better you can help clients understand and stick with you through this, the better for us. It really has to be a partnership."

However, sometimes, the market cannot provide a solution that is going to make everybody happy, which is when collaboration and strategy between agents and carriers need to take the front seat—with the frustration in the back or, ideally, not even in the car.

“If there's going to be a rate increase, conditional renewal or non-renewal, we want to know as soon as possible," Kroeger says. “But if there's a broader change that's going to affect our book, then that is something we want to hear from the carrier's senior leadership where they proactively advise, 'We're looking to make these changes, we're going to increase rates in these classes of business and we're going to need your support.'"

“Having that conversation means that we know what to expect going forward, so we can evaluate our book of business to see how we can be more strategic and proactive with clients or see what we may need to remarket," he says.

Talking It Out

At agencies, the hard market has created pressure that most agency staff, including some of the most seasoned agency veterans, have never experienced. Wherever there's pressure, strain and frustration, it can be a matter of time before human nature overrides professionalism and tempers flare, leading to a breakdown in the all-important collaboration, communication and productivity—which will ultimately negatively impact the agency's performance.

“Whether it's on the sales or service side, everyone can get emotional," Kroeger says. “To protect the agency's reputation, it's of paramount importance for agency leaders to listen to concerns from staff and build strategies around addressing maintaining strong relationships with your key trading partners."

For an agency to remain successful through the hard market, it is crucial for agents to manage their emotions when dealing with bad news from carriers. Reacting emotionally can harm relationships and negotiations in both the short- and long-term, which will hurt the agency's bottom line.

If dissatisfaction arises with a carrier, it's vital to address the issues before they escalate. “A mantra that I use is: When in doubt, talk it out," says Patrick Galvin, speaker, author and the chief galvanizer of The Galvanizing Group.

“Begin by documenting instances where expectations were not met and outline the impact on your business," Galvin says. “When approaching the conversation with a carrier, it's helpful to maintain a collaborative tone and seek to understand their constraints or challenges as well. Offering solutions or alternatives rather than just presenting problems can facilitate a more constructive dialogue."

Crucially, effective and constructive dialogue is rarely conveyed via email, text or chat. In fact, written communication can often increase the chances of miscommunication and misunderstandings, and supercharge ill feelings.

But while it is important to pick up the phone to discuss challenges with partners, sending a calendar invite in advance or a discussion is a productive way to facilitate conversation. This allows both the agent and company rep to gather accurate information and approach the conversation calmly.

“There's so much that can be read between the lines—and that's dangerous," Galvin says. “We're all enraptured by technology and artificial intelligence at the moment, but in difficult times we really need to be leaning into our emotional intelligence."

In the hard market, agents must “double down on proactive, positive relationship-building" and “avoid burning bridges to keep lines of communication open for future opportunities," Galvin says. But sometimes—and this happens to us all—emotions can get the better of us. It's more likely to happen when underwriters are slow to provide quotes, don't respond, or neglect to communicate guidelines or appetite changes.

“It's easy to say but hard to do, but don't make rash decisions and don't take it personally—business is business," Salas says. “It'd be a mistake to take it all to heart and start moving business away from one carrier."

“If you need to move a client for their own good, do it, but do it in a way where you're not making the carrier look bad in front of the client because you might need to move them back in a few years. Our industry isn't that big," he says. “Voice your concern, but there's no need to beat up the underwriter. And definitely don't go on LinkedIn and blast an underwriter or name a company."

In the face of bad news, agents can benefit from adopting a stoic approach, focusing on what they can control and maintaining quality relationships with clients and carriers. Stoics follow “a mode of conduct characterized by tranquility of mind and certainty of moral worth," which enables an individual to “better order his own life and to avoid the excesses of human nature that promote disquietude and anxiety," according to Encyclopedia Britannica.

“I am a huge believer in stoicism right now," Galvin explains. “Whether it's the rise in the frequency and severity of claims, competition from other agents or the direction of the economy, all of these things have one thing in common: You have no control over them."

“By adopting a stoic approach to insurance, you can focus on what you have control over, which is the quality of the relationships that you build with clients, colleagues, people who refer business to you and the people in your community," he adds. “If you spend all of your time beating your head against the wall because someone's pulling out of the market, it's a road to perdition."

Value Your Relationship

“Your No. 1 ally in the commercial insurance game are your underwriters," wrote Rob Jacomen, founder of Basecamp Insurance Growth Mastermind, on X. “Build relationships with them, feed them new business submissions they'll actually love to write, treat them with respect, and don't give them a half-assed submission with incomplete info."

Sarah White, vice president—real estate, Virtus in Overland Park, Kansas, emphasizes the importance of transparency, education and proactive communication in maintaining positive relationships with underwriters and the significance of understanding carriers' underwriting appetites.

In the complex commercial real estate market, White utilizes a submission process that includes detailed presentations and coverage specifications to make underwriters' jobs easier. While Virtus' internal procedure to begin the renewal process 120 days from renewal conflicts with underwriters' willingness to review a submission 90 or 60 days from renewal, “I'm very upfront with the incumbent about not only the fact that we're marketing, but who we're marketing it to and why," White says. “I think that helps set expectations and make sure we're aligned on the front end."

“Then, we put together best-in-class submissions. This is huge in the hard market," White says. Her agency's submissions consist of a presentation with historical exposure, valuations and how they were reached, company background, owner profiles, lender requirements and risk management protocols and culture, as well as the company's relationship with the incumbent carrier when remarketing the account.

“Clarity is our competitive advantage. We are concise but always include all the information the carrier might need wrapped up in one package to avoid any back and forth and delays," White says. “It's also incredibly important for agents to understand their carriers' appetites. Pre-submission, we conduct our own underwriting process internally to determine if the risk is even worth their time, which ultimately strengthens our relationships and deepens the trust we've built with our carriers."

White also points out that when a carrier must decline a risk, her respectful approach to submissions pays dividends when she needs to ask for an explanation for declinations or to engage in constructive conversations about borderline cases.

“Typically, our best carriers will provide some data or an evaluation report for why they declined a risk," White says. “If a risk is on the cusp of their appetite, they're picking up the phone to call us and say, 'Hey, it's leaning toward a no, but if you help me understand why I should write it, I might be able to make an exception'—and that shows a true partnership."

“The market's been hard for the last several years but in the first quarter of the year, we've seen a slight shift to more of a stable marketplace," White adds. “We're not seeing big reductions or anything like that, but the increases are not the astronomical 20%-30%. We're seeing more 5%-10% increases and, in some cases, flat. There's a positive outlook right now."

The question is: What state will agent-carrier relationship be in once the future emerges?

Will Jones is IA editor-in-chief.