Commercial lines evolution

My Insurance Broker outlines how personal lines brokers can rely on an open market correspondent partner to help them build a commercial book of business

Commercial lines evolution

Insurance News


Amid growing expectations to serve clients and adapt to their needs, brokers are facing more pressure than ever to create value beyond price. At the same time that new technologies continue to facilitate varying methods for accessing insurance tools and coverage, the COVID-19 pandemic has introduced an unpredictable and seemingly unwavering force that has further complicated the landscape. With demand for digital automation, policy autonomy and socially distanced servicing, relationship- based brokers are struggling not to become a thing of the past.

In light of these new pressures, many personal lines brokers are finding it difficult to remain confident in the delivery of a three-party insurance solution. In response, brokers might be wondering how they can adapt to a rapidly changing environment.

Many personal lines brokers have found an opportunity to remain relevant by pivoting toward commercial lines products and services. But with a wide array of special-ties to choose from, finding the right avenue for time, value and remuneration can be a challenge. This is where working with small package commercial solutions and MGAs can be a great tool in learning a new segment. These solutions offer packaged coverage for specific industries on a catch-all basis.

With the outlay of seemingly simple business and operational details, a broker can quickly pull together a proposal for a prospective insured and provide a comprehensive solution without much knowledge or expertise. However, as business needs grow and change, this can result in customers being left without appropriate coverage or misrepresentation of risk – and clients being more susceptible to being poached by other, more experienced brokers.

The first steps

So where do brokers start? “Brokers should always start by re-establishing their pursuit of knowledge and delivery of service to their customers,” says Simon Walker, general manager of specialty solutions at My Insurance Broker. “With these benchmarks for excellence in mind, it is far easier to justify the time and effort required to be a dedicated commercial broker.”

Walker and his team focus on what he calls “the weird and wonderful” – solutions for business that others might deem too challenging or difficult to place. These businesses can be as small as a nail salon or a lakeside resort or as large as an international weapons manufacturer.

Walker and his team have made this task increasingly easier through the acquisition of open market correspondence (OMC) status with the Lloyd’s market. An OMC is an insurance intermediary that introduces business directly to an accredited Lloyd’s broker for placement in the Lloyd’s market on an open market basis. This type of coverage, which is typically a one-off coverage solution, is issued by Lloyd’s according to the individual risk profile presented.

Lloyd’s requires that insurance entities in Canada be approved or registered by its attorney in fact or general representative before they can produce business to one or more sponsoring Lloyd’s brokers for place-ment on an open market basis. Fewer than 900 brokerages internationally are approved OMC registrants with the Lloyd’s market, which gives Walker and his team a strong advantage in placing hard-to-place risks.

So how does this help brokers transition into commercial lines? The space is dominated by highly trained and competitive brokers, which could make for a daunting and frustrating environment when brokers approach domestic markets that have been blocked or attempt to penetrate longstanding relationships. Partnering with an open market correspondent makes for a much more desirable setting for a few reasons.

First, accounts and risks that are deemed more difficult to place rarely have solutions supplied by the traditional market. Second, because many of these customers are looking for a knight in shining armour, they may be open to forming new relationships when they have been unsuccessful with other broker partners. Either way, this is the breeding ground for success for new entrants to the commercial space.

In addition, Lloyd’s has responded to antiquated processes by embracing change and automation to create easier flow and access for brokers through its OMC partners.

“We are prioritizing development of the next generation of PPL, building APIs to increase the digital flow of data, launching a virtual underwriting room pilot to complement the physical underwriting room in London, improving the technology and processes for managing delegated authorities and delivering enhancements to our claims value proposition,” says Marc Lipman, president of Lloyd’s Canada.

Finally, this arrangement offers the broadest and most complete view of front-line commercial underwriting, given that applications, accounts and submissions are meticulously reviewed before a quotation is offered and coverage is placed. Brokers can understand the rigour and detail required to be a strong commercial lines broker. Not only does this breed greater success for future accounts, but it also ensures that market availability is accessible to provide a solution, regardless of the market segment or complexity.

OMC versus MGA

How does an OMC’s work differ from what a managing general agent does? MGAs traditionally have relationships with domestic carriers or Lloyd’s syndicates to offer certain coverage to certain classes of risk. This narrow scope offers competitive rates for risks of a certain class. However, should a risk not fit the criteria, options become increasingly limited. This presents the potential for a variety of issues, such as binding incorrect limits or customers intentionally misrepresenting a risk in order to acquire coverage.

In any scenario, forcing risk placement can have irreparable and long-term consequences. A broker could also need to approach many MGAs to find a potential solution, as their relationships with their capacity and binding authority may vary. With a complex risk, a single MGA might not be able to provide all the solutions necessary to cover it off.

Because OMCs submit directly into the Lloyd’s market – in many cases, to the same syndicates that MGAs also work with – brokers and customers are eligible for customized coverage limits and policy wordings to fit their specific business needs. This offers a comprehensive solution without sacrificing coverage, limits or business operations. It also allows for the flexibility required to make sure insurance options are truly an all-comers market without turning away prospects, building the customer’s trust and confidence in a broker’s ability to handle and place risk on their behalf.

As brokers broaden their horizons, it’s no surprise that the commercial lines space continues to become an important area of interest. As such, it is vital for brokers to find avenues to build their knowledge and confidence, satisfy their development goals, and serve their communities in new and innovative ways. A specialty, niche insurance partner that can help facilitate avenues in underserved segments of the insurance market can offer a unique opportunity for brokers to create value beyond price and remain relevant for generations to come. Having a strong open market partner can give brokers the flexibility and accessibility to stand out from the crowd. 

Keep up with the latest news and events

Join our mailing list, it’s free!