What’s changing the way commercial brokers view loss control?

It’s possible the pandemic, combined with the P&C industry’s ongoing hard market, may have permanently altered how insurers assess their risk appetites.

And brokers wise to this shift have adjusted their approach to advising clients accordingly.

Given that insurers are more selective about choosing to do business with accounts that have low or no claims histories, the broker’s role has become more holistic. Instead of focusing on a commercial insurance policy as the primary way to transfer risk, commercial brokers are now exploring ways for their clients to improve their risk profiles.

“A number of tools are available to clients to combat the market,” said Russ Quilley, head of commercial risk at Aon Canada.

“They include captives, retention strategies, and internal mitigation strategies clients are undertaking post-loss. What did the client learn [from the loss]? What has the client changed around its operations? [The reason for the loss] could be as simple as the client didn’t have a snow removal company.”

Subscription policies have also become much more common during the pandemic. That’s when multiple carriers insure portions of a single risk.

For example, an office tower once insured by a single company may now be insured by six companies, each taking on a different piece of the risk. Having to find multiple markets is more work for the broker, but for companies looking to reduce their risk appetite, it became a widely used strategy.

“Brokers are looking at creative program structures,” Brent MacDonald, managing director of Marsh Canada, reported.

“I think the historical way of [brokers] looking [for] a single market and a lower deductible structure used to be the market norm. But brokers are now looking at high-deductible programs, quota shares, and exploring the feasibility of captives. That was all part of what brokers needed to do over the last few years.

“We have come into this period with a better industry workforce, a smarter workforce, and I think a more educated clientele. I think clients now are better positioned to have more of a risk focus going forward.”

This story is excerpted from one that appeared in the May print edition of Canadian Underwriter. Feature image by iStock.com/sesame