As agents and risk managers face a new year with continuing hard market challenges, the first quarter of 2024 is an excellent time to discuss the financial, property or operational changes with your clients that may impact their insurance coverages.

A recent survey from Trusted Choice® found that nearly 70% of Americans are currently reviewing their coverages and 45% are doing so due to rate increases. However, you can solidify your relationship with clients by helping them understand the current market and providing them the coverage they need at the price they need.

Communicating with your clients via email or letter is essential, but you can also reach out via social media campaigns. This allows you to educate clients about the hard market and how their own risk exposures can reduce liability for your clients' organizations. Additionally, documented outreach on problem coverage areas, such as underinsurance, can help your agency avoid an errors & omissions claim.

Crucially, at a time when agencies are feeling the squeeze from increasing operational costs due to inflation and companies cutting commissions, solidifying relationships will help retain clients and protect income.

Personal Lines Challenges

With consumers experiencing steep rate increases even nonrenewals, discussing higher deductibles with your personal lines clients is a good approach, especially with high net-worth clients where assuming more risk is realistic.

However, it pays to educate your clients with a more modest property or auto portfolio about the potential benefits of a higher deductible. The benefits include a lower premium and the ability to avoid reporting a loss that may impact their renewal.

With up to 40% of E&O claims filed against personal lines policies, it's important to frequently remind your personal lines clients of changing exposures:

1) Life events. These events include marriage, divorce, the birth or adoption of a child, or a new youthful driver in the family. When it comes to aging, consider the need for a referral to a life and health agent for disability or other coverages such as a cancer supplement.

2) Insurance-to-value ratio pressures. Home renovations, such as a kitchen remodel or the addition of another living unit, should trigger a coverage reevaluation. Agents should explore their clients' needs for higher limits for additional living expenses with lengthier renovations given supply chain and contractor availability, as well as higher law and ordinance limits.

3) Acquisition of valuables. This includes jewelry, art or guns that may belong on a separate schedule due to limitations in the homeowners personal property coverage.

It's best to ask the carriers to run any replacement cost estimates and insist that the insureds pick the level of coverage given the information you furnish. However, always suggest the insured consult an appraiser or contractor for the best replacement cost estimate.

4) Operating an in-home business. This can create both general and professional liability exposures, as well as the need to insure office equipment, such as computers or other items.

5) Exploring potential rate reductions. Identify additional safeguards, such as low mileage forms on seldom-driven vehicles, burglar alarm installations, or other risk-reduction techniques that can reduce the risk and lower rates.

6) The need for higher limits. Highlight risks that can require higher liability limits or an umbrella policy for all insureds.

Receiving an annual update helps to prevent negligence allegations and builds stronger ties with your insureds.

Commercial Lines Challenges

For your commercial lines clients, the first quarter is a great time to examine the past year's performance and any changes. Changes can not only create differences in payroll and sales information, which are crucial in the rating process, but can also create uninsured exposures.

Here are some key topics to clarify with your commercial clients:

1) Changes to payroll or sales data. During the pandemic, many contractors' and vendors' sales numbers and payroll increased dramatically. However, as COVID-19 restrictions eased, many business owners saw reductions in these numbers, leading to an impact on premiums. As business owners face a 2023 tax season, reviewing their prior year's financials can mean adjustments to their coverages.

2) Updating vehicles and scheduled property. Are all schedules current, and are current values adequate to repair or replace that equipment?

3) Loss runs. Offer any risk management assistance based on this data. Discuss open lagging claims or provide an update on problematic or potentially over-reserved claims. On closed claims, watch for missed subrogation opportunities, such as a non-chargeable auto accident with recovery potential.

4) Significant changes. These changes can include adding or removing a partner, venturing into new areas of products or services, such as a handyperson who now replaces roofs, or a new endeavor not covered by a general liability policy, such as offering consultations.

5) Response to increasing litigation. Remind your commercial clients of the importance of coverages they may need such as employment practices liability, pollution liability, or active assailant coverage. As society changes, business owners face increasing risks of litigation and new and improved coverages emerge to protect them.

6) Coverage limits. Review potentially problematic coverage limits, such as liability limits, business income limits and umbrella limits.

The Proof is in the Documentation

A vital practice for all agents is documenting these conversations. If you offer a coverage, such as additional coverage for assault & battery for a tavern, and the insured rejects that coverage, ask your insured to sign a form declining the offer. While an email of a coverage declination or rejection will help defend you if needed, it's a best practice to obtain the insured's signature on a form before you implement a coverage change, notify an insured about coinsurance issues, or change the policy to higher deductibles.

Agents never want to face a negligence allegation where your insured asserts that you “didn't offer that coverage" or that they “never requested that coverage change."

Some insurance experts suggest the market may soften slightly in 2024 in response to carriers' rate increases to the historic market conditions. However, whether 2024 softens or, in some lines, hardens, the more you communicate with your clients, the stronger your relationship with them.

Nancy Germond is Big “I" executive director of risk management and education.