The insurance industry is highly regulated, as it should be, and it plays a vital role in providing financial security to businesses and individuals. However, despite the regulations and laws, it is not uncommon for an insurance carrier to pull out of certain states because of financial instability, changing market conditions, or regulatory changes. If you learn that your insurance carrier plans to exit your state, you may feel slight panic.
After all, the situation does present several challenges that affect both your agents and your clients. Your sales agents need to continue to manage their insurance book roll effectively, regardless of when the carrier plans to exit. Keep reading to discover how your agents can handle this situation when it happens and how to avoid severe disruptions in your business.
Understanding the Insurance Book Roll
An insurance book roll, or book of business, refers to all the insurance policies your agency underwrites and manages. It is your agency’s most critical asset and represents a steady stream of commissions and potential renewals. Each of your agents adds to their insurance book over time as they sell more policies. This accumulation of clients helps build your agents’ financial security through ongoing commissions.
However, as time goes by, the composition of your agency’s overall insurance book roll may change. You’ll add new policies and deal with canceled coverage or lapsed accounts. This will cause your book roll’s size and profitability to fluctuate.
When the book is associated with a particular carrier, and it decreases to a too-low amount, the carrier may request that your agents find more business. If your agency fails to provide the increased business volume, the situation can become challenging.
Reasons Why Insurance Carriers Exit States
Insurance carriers have various reasons for pulling out of certain states. These reasons may include the following:
- Financial instability: If the carrier has financial problems or cannot maintain the required reserves for potential claims, they often have no choice but to withdraw their operations.
- Changing market conditions: New competitors and regulations or unexpected economic shifts can cause uncertainty in the insurance market. These changes may also make it less profitable or sustainable for carriers to continue working in a particular state.
- Regulatory requirements: Most often, regulatory requirements are not the same from one state to another. When regulations become too complex or costly, carriers may decide to exit a state to avoid unnecessary challenges.
- Unforeseen events: Events like public health crises or natural disasters often lead to massive insurance claims. These claims can put insurance carriers out of business or prompt them to leave certain states.
Maintaining an Insurance Book Roll When an Insurance Carrier Pulls Out
If your insurance carrier decides to pull out of the state, it will impact your agents and your business. The following steps will help you manage the situation.
- Assess your book of business: Start by asking your agents to assess your insurance book. Identify the policies underwritten by the existing carrier and categorize them according to type (car, home, life) and status.
- Review contractual obligations: Review all contracts and agreements with the carrier. Check if any termination or transition provisions exist, and determine the procedure the carrier must follow when leaving the state.
- Contact clients: As soon as your carrier notifies you that it intends to exit the state, you must communicate this to your clients. Reassure them that their coverage will remain in place until the end of their policy term.
- Seek alternatives: Even before the carrier leaves, you should start researching and contacting alternative carriers still operating in your state. Study their offerings, ask about their commission structures, and let them explain their underwriting guidelines. This will help you determine the best fit for your clients and agency.
- Get the transition going: Work with the exiting carrier and the new carrier to ensure a smooth transition of insurance policies. At the same time, inform your clients about any changes in coverage or premiums. Make sure to address their concerns and answer their questions to give them some peace of mind.
- Adhere to regulations: Employ a legal professional to help your agency stay compliant throughout the transition process.
- Always stay informed: You must stay informed about any additional industry developments, including those that impact regulations, to ensure you mitigate the effect on your insurance book.
- Adapt and evolve to retain client trust: Use an unexpected exit or transition to evaluate your business trajectory and diversify your book of business where possible. This will allow you to reduce your agency’s dependence on a single carrier. It will also help you retain client trust. This is essential for your agency’s ongoing success.
Overcome the Challenges of an Exiting Insurance Carrier
Clear communication and a commitment to continue serving your clients will go a long way in navigating the challenges of an exiting carrier. If you follow these steps, you can make the most of a difficult situation and continue to provide the insurance solutions your clients need.