The transportation insurance industry is healthy in the US - it’s a growing industry, especially in the excess and surplus (E&S) markets as coverage needs become ever more complex. However, it hasn’t had green lights all the way…
Transportation is an attractive area for brokers and insurance companies because of the revenue that can be made – but some people have crept into the marketplace without the expertise to do so, according to Mark Sullivan, commercial broker, Transportation, Midlands.
“Some people don’t underwrite by the guidelines that the rest of the nation and the rest of the world follow,” Sullivan told
Insurance Business. “In the past few years, they have entered the transportation market thinking they can re-invent the wheel – but they’re not doing that.
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“In fact, they have killed some of the integrity of rates in the market and have forced others to adjust rates to compete. However, we have had a lot of rate increases this year and the industry is getting back to where we need to be – maybe even a bit higher than we were before.”
The people who misuse underwriting authority to challenge rates are also typically the professionals who fall by the wayside, leaving others to pick up the pieces, according to Sullivan. It’s sometimes down to poor control of authority within a company.
“There is sometimes a lack of control in what is called ‘MGA authority’, when MGAs or wholesale brokerages allow their staff to utilize writing authorities when they haven’t been properly trained in them,” Sullivan commented.
“When you have a high amount of staff using an authority that doesn’t know how to properly use it – that’s where the errors happen and the company gets into trouble. Any authority that I have at Midlands, I keep very controlled. I have assistance but I handle the brunt of actual quoting and binding myself and I double check everything that goes out the door.”
This competition-driven problem within the US transportation insurance market comes down to poor client service – something you won’t get at Midlands, according to Sullivan. He said the company prides itself on its top service levels, in-depth relationships with clients and carriers, and being upfront and honest about insurance expectations.
The cost of transportation units is much higher today than it was 20-years-ago. There’s a lot more technology in play and, therefore, a lot more for companies to insure. Brokers and agents need to be realistic about rates and show clients that transportation is an evolving market with insurance products developing alongside it, said Sullivan.
He added: “It’s a shame - we have distributors out there busting a gut to get clients, who are having to return to their clients a month later to cancel the agreed policies because they were underwritten incorrectly by a wholesale broker or MGA. Getting this business right all comes down to training and expertise.”
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