Over the past few years, the personal umbrella market has been impacted by adverse factors including rising inflation, an increase in the frequency and severity of claims, as well as deteriorating loss ratios. The losses experienced in this market are considered outside of the norm for the segment and have led to carriers altering what and how much coverage they are willing to offer. What was traditionally a market that offered a lot of choices for customers has now become a little more unpredictable.

“Carriers have responded to loss pressures by tightening their offerings, providing lower policy limits and raising attachment points, especially in the admitted market," says Danielle Westen, vice president and head of personal umbrella business, Hudson Insurance Group. “For admitted carriers, some of the most immediate corrective measures to alleviate loss ratio stress involve requiring higher underlying liability limits on auto and homeowner policies and capping the maximum limits on the umbrella coverage they provide." 

These changes are continuing to add to the volatility within the market, creating additional work for agents and making it harder for agents to find coverage for their customers, whose demand has increased as awareness of large jury verdicts grows.

To alleviate this issue, “carriers are constantly reviewing policy language to make sure we've got the right endorsements to meet evolving needs," says Shannon Cragg, vice president of personal lines casualty claims, Nationwide. “We are striving to clarify coverage, making it understandable for people."

Additionally, “carriers are increasingly adapting their offerings to meet the diverse needs of their clients by providing more flexible policy options or coverage structures," Westen says. “For example, some carriers may allow exclusions for specific high-risk activities or properties to offer more affordable premiums, particularly when dealing with non-standard risks that standard carriers may not cover."

This is where agents' knowledge and expertise play a crucial role in identifying the coverage carriers are offering and meeting the unique needs of their clients.

“By understanding the underwriting appetite of different carriers and whether they adhere strictly to guidelines or can offer more flexibility, agents can better tailor coverage to meet client needs and ensure that gaps in coverage are avoided," Westen says. “Insurance carriers who write on non-admitted paper will often have more a flexible underwriting approach and be able to tailor coverage to a specific client."

As the market evolves, agents can continue to add value by taking the time to ensure their clients are cognizant of today's increasingly litigious environment.

“Agents can add value by offering personalized risk management advice, helping clients identify exposures they may not have considered, and recommending appropriate limits based on their asset protection needs," Westen says. “Providing regular coverage reviews to ensure clients remain adequately protected as their circumstances change is another way to build trust and strengthen client relationships."

Additionally, identifying any misconceptions and common coverage gaps within personal umbrella coverage is key.

“One thing that's important for agents and customers to understand is that many umbrellas have exclusions that are specific to their underlying coverage, including which carrier that coverage is with," Cragg says. “For example, some companies will underwrite an umbrella policy and it doesn't matter which carrier is writing the auto liability coverage, but some companies require that the underlying coverage is with the same company. That's a call out for agents and customers alike to understand that there's not an exclusion there that could hamper them because they don't have the right underlying policies." 

Nevertheless, “more and more, we're seeing insureds that understand that exposure is exposure no matter what stage of life they are in," says Daina Kawchack Smith, chief marketing officer, PersonalUmbrella.com. “A large portion of clients have a financial advisor or agent who has mentioned an umbrella because they have a high-value home, multiple assets, like watercraft or rentals, or have children or a multi-generational home, who may be concerned about vicarious liability."

For customers to purchase umbrella coverage, education is key. Debunking the common misnomer that coverage is expensive, agents can ask clients to “consider the coverage that you're getting it's the cost of a K-cup and it can provide some substantive coverage for their assets," Cragg says.

“While customers are very knowledgeable, agents are the most knowledgeable," Cragg adds. “In using real-life examples when walking through a customer's profile and exploring those potential risks, it can help illustrate where an umbrella policy can be a good offering for them."

Olivia Overman is IA content editor.