By now, professionals across our industry are well aware of the instability of the California insurance market. California is a high-risk area to insure, as both personal and commercial line insurers have reported frequent, costly losses from wildfires, landslides and earthquakes. Now, insurers are forced to navigate higher replacement costs due to inflation and supply chain challenges and, of course, new underwriting guidelines mandated by the California FAIR Plan.
Many insurers have pulled out of the market. Those that remain have had to implement strict underwriting guidelines that leave certain ZIP codes very difficult to insure, and sometimes the California FAIR Plan is the only option agents have. The FAIR plan has had an influx of business, which means it can even take 30 days before the agent can get the quote back. And sometimes the FAIR plan comes back with additional questions after the review period, which could lead to a lapse in coverage. This, in tandem with concerns about the long term viability of the FAIR plan, have created a difficult set of circumstances for agents to work through.
So, what can an agent in the California market do to support insureds and maintain or grow customer satisfaction while navigating these challenges?
Outreach, empathetic communication and client education are key.
See also: Seizing Opportunities in CA State Insurance Crisis
Understanding client needs
Outreach is essential in a difficult market. Our insureds are hearing all over the news that insurers are leaving the market and that rates are skyrocketing. This only damages our reputation. Early, transparent client education can help mitigate this issue.
As a trusted partner of our clients, we must keep them apprised of market conditions. For those in disaster-prone areas, we should offer easy-to-understand explanations as to why these areas are more difficult to insure. If premiums are rising, we should share why that is and provide an outlook. Often, during these difficult conversations, we also have the opportunity to share educational materials with our clients. For example, agents might consider sending over trade articles explaining the market challenges so insureds can learn more about the issues in their own time.
When premiums rise, agents also have an obligation to consider alternative solutions to keep costs manageable for clients. For example, offering a higher deductible is an option. Encouraging the client to implement risk mitigation practices such as leak detection technology for homes can also help reduce costs.
Of course, there are only so many solutions an insurer can offer in the current California market. Clients will still find frustration with rising costs and difficulties securing adequate coverage to protect their homes and businesses. When a frustrated client calls, we need to be empathetic. Let them say what they want to say and offer support and reassurance that we are here to support them. In some cases, it may even be wise to recommend the client shop for other insurance policies. Provide them with contact information for other major insurers, such as Costco, AAA or Geico, and encourage them to shop around. This experience can showcase just how difficult it is to find coverage today for the frustrated policyholder.
Increasing touchpoints
Reconsidering communication touchpoints is also crucial. While a boots-on-the-ground approach may have been the go-to tactic prior to the pandemic, there are a few methods for agents and brokers to consider in 2024.
In the past, we often stressed regular client in-person visits to remind them of our value and develop the relationship. In-person visits remain important and should be done at least annually, or even quarterly with larger clients. Renewal is an ideal time for agents to meet with clients to review their policies. This review should examine whether they have adequate coverage to protect their home or business, whether any new risk measures could help keep costs down and whether there are any trends or pending legislative updates that could affect their policy.
Today, clients want to know their insurers are available to them at all times. And with the rise of Zoom and other video conferencing platforms, our industry now has plenty of additional resources to schedule more frequent client communication. Make sure clients know you are accessible and can easily book a video or phone meeting at any time they may have an issue. Live chat solutions are also valuable. Insureds should be able to visit your website and connect to a live agent quickly. Today’s agent musts be able to mold their business model to these new systems and new means of connection. Both existing and potential clients want an insurer that can provide quick and easy answers to any questions they may have.
See also: Parametric Insurance Can Tackle Climate Risks
Recommending risk mitigation
Lastly, agents should dedicate resources to risk mitigation., which remains a critical practice for keeping policy costs down. For example, on the personal lines side, agents should ensure clients have the latest leak detection technology. They should also have alarm systems onsite. With wildfires continuing to threaten insureds, agents should recommend common fire mitigation practices such as tree and bush trimming and creating defensible space.
On the auto front, teenage drivers continue to be a frequent source of losses. Agents should encourage parents to stress driver safety, following speed limits and avoiding distracted driving with their teen drivers. In some cases, we also recommend agents encourage policyholders to implement driver monitoring technology on teenagers’ phones.
For both businesses and homes, agents should be talking to clients about smoke and carbon monoxide detectors. They should also encourage employers to pay close attention to employee training to ensure staff is adequately prepared to work safely, whether operating dangerous equipment or simply walking around the facility. Regular equipment maintenance and inspections should be considered safety practices, as well. And as always, clients should have an emergency response plan in place in case of any disaster.
Recognizing the silver lining
The California insurance market may be at a challenging time for agents, but there is a silver lining. We are starting to see faster approvals for rate increase requests by insurers, so the industry can keep up with the rising cost of claims. This is an important first step toward normalizing the market. We have also started seeing quicker quote approvals from the FAIR plan, which is a good sign for the future.
While our agencies wait for the market to stabilize, agents will want to prioritize customer communication. Those who focus on empathetic and more frequent client communication to ensure client satisfaction can continue to thrive despite the market challenges.
