Why Communication is the Best Thing For Bad Rates

Renewals are easy when you're talking about rate decreases.

Who doesn't want to pay less for what they already have?

The true test comes when you need to tell your client they're going to pay more for less.

That's not an easy conversation to have and one you might not have had to experience until now.

RPS Vice President of Market Relations, Russell Duffey talks about the things you can do and say to stand out during these hard times.

Joey Giangola: Mr. Russell Duffey, how are you doing today sir?

Russell Duffey: I'm doing great. How are you doing?

Joey Giangola: I'm doing all right, I'm doing all right. So I was thinking about it as I was saying your name aloud a few times. If your name was a cocktail, what would it be? Because I feel like that's something that would be great to order, "I'll have a Russell Duffey please."

Russell Duffey: For me, it would be a really nice IPA, I would tell you from that standpoint, I'm an IPA guy.

Joey Giangola: I feel like you should explore licensing rights for it.

Russell Duffey: You may be right. You know, the Simpsons might have beaten me to that though, with Duff Beer, right?

Joey Giangola: Well, I guess. It's like an abbreviation of your name. Maybe an extreme appetizer of some sort. "I'll take the Russell Duffey Challenge," or something, I don't know.

Russell Duffey: I'm in if you're in, I'm in.

Joey Giangola: All right, we can work something out. I'm sure there's a restaurant chain somewhere that we can approach.

Russell Duffey: Absolutely, absolutely.

Joey Giangola: Well we'll talk after. But really what I wanted to talk to you today about was, more about what we're dealing with in terms of marketing conditions. What should we be thinking about, and really, how they should be approaching this. For some, the big thing is, the market hasn't taken this turn in close to a decade. So you've got almost, dare I say it, an entire generation of agents who have very little experience with such communication and sales tactics. What are we seeing from that standpoint? And how do you think agents, especially the ones that have only been in it a couple of years should be looking to approach it?

Russell Duffey: Yeah, that's a great point. I think on all sides, whether it's on the retail side, wholesale side, carrier side. There are people in this business that haven't experienced the fact that we're seeing tightening terms, increasing rates, shortening of limits.

Russell Duffey: And quite frankly, a lot of folks have sold insurance as a commodity and not on the value that they provide to their ultimate client, right? Communication is the biggest thing though. You've got to be out in the market well in advance, your data, your submission, has to be just spot on, right? There are so many submissions hitting the marketplace right now. I talked to Mark, it's all day, every day. And all they tell me is, they have more submissions than they can handle right now.

Russell Duffey: So what do you do as a retailer or wholesaler, to get that underwriter who has a stack of submissions to stop and look at yours? Your submission has to be spot on. If it's not, you're just not going to get the result you want.

Joey Giangola: Yeah. That submission definitely needs to be improved during these times. But, talk about the idea of maybe not even having a great option, a perfect or best option. What does that look like when you're moving down the line and you really need to make the best of a bad situation? What does that conversation need to be? How do agents needs to focus on that?

Russell Duffey: It's a good point, and you have to do that all the way through the chain, right? So as wholesalers, we need to do that with our retail clients and say, "Okay, your insured has an exposure that's going to be difficult, number one, potentially in this marketplace. And available markets are one, two, and three." And that may be it, right? "We would suggest that you explain to your client now, this is going to be different than it has been." They may feel like it's a bad thing, it doesn't mean it's going to be bad, it's just going to be different, right?

Russell Duffey: In years past, where they may have had five, six, seven different possible quote options and varying coverages and limits. In many cases we're finding to get that one that actually gets the job done, that's a really good job that puts in by brokers at this point in time.

Russell Duffey: But communication, you're absolutely spot on, you've got to be talking to your client.

Joey Giangola: Yeah. Even talking about that, like you said, even though there might only be one option. How are they presenting the fact that there is only one? Because sometimes they're just having that ... Even if it's twice the price or whatever it is, just saying, "Listen, we approached X, Y, and Z, but they wouldn't even give us a rate." How are they communicating that aspect of it?

Russell Duffey: Well, that's part of ... you just hit on part of it is. You need to be as a retailer going, "Here's where I went. These are the folks that normally I would go to. This is how I would approach your risk. This is what we would do to provide solutions for you. These are the partners that we would go to." Then you need to be able to come back to them and go, "All right, these guys will do it but they only want to attach up here, and you don't meet that criteria." Or, "This carrier will do it, but they're going to exclude sexual and physical abuse. That's something that we need to cover for you, so that's not an option you really want to go down right now."

Russell Duffey: In the past where you had, "Hey, I had six options and these are the three best." That was kind of the way that retailer and even wholesalers would work. Now it's, "Hey, here's the one option I have for you. Here's where we went, here's all their responses." You do need to provide that, because I think it's important that ultimately the insured needs to know. "All right, I had a thorough marketing of my exposure and this is the answer for me."

Russell Duffey: And like I said, it may not feel good at this point in time because this may be the only answer I've got, but I at least understand what they did. What will get any type of broker or wholesaler or retailer in trouble is just to go, "Hey, here's the only one quote I got," and not tell the work and the value and the effort they put in behind it. That plants a seed in someone's mind to go, "Maybe something else is better out there." Maybe there is, but if you're not telling and providing what your value was in it, and why this is the option, you're going to leave yourself open for questioning.

Joey Giangola: It's definitely a story worth telling, and telling with enthusiastic color. You know what I mean? In terms of making sure that you're very descriptive, you really get into it, and you make sure that they're along for the ride with you, as they understand the depths of it.

Russell Duffey: Right, good point. And do it, for example, today is not the right time to be calling up your client and telling them that's going to happen on 7/1, right? The idea is, you should be having those conversations now for the October renewal, a November renewal. "Hey, just so you know. I just wanted you to know what I'm seeing in the marketplace. Your renewal is coming up in November. I just renewed another account just like yours, this is what I had to go through. I wanted to put you on notice now, you need to make sure that we get our statement of values or our loss runs in the right order."

Russell Duffey: Start planting that seed of, "We've got to be spot on to do this," and providing some information up front of what ultimately that client can be expecting.

Joey Giangola: Yeah. Those expectations are huge, because they're coming out of a time period where things have been easy. It's minimal increases in some cases, rate reductions.

Russell Duffey: Yep.

Joey Giangola: If you can't keep a rate reduction what are you doing?

Russell Duffey: Right, right. Well, you mentioned it earlier. There are folks in all aspects of the value chain, from the carrier all the way down, who have never had to sell anything but a decrease. And then all of a sudden that switch has been flipped, and it definitely makes you have to pivot.

Joey Giangola: Yeah, completely. I want to kind of talk about the coverage aspect of it a little bit too. Because, that in some cases can be a bigger deal than necessarily the price in a lot of ways. Because if it just doesn't work for the client anymore, that's where it becomes even more challenging. And sometimes they might not even be able to get a particular coverage or limit that they basically kind of feel is bare minimum. And it's that conversation is one that I think is even harder to have, because they're just at a bigger risk. They have to actually adjust the way that they're doing business in some other fashion.

Russell Duffey: Right. That's the kicking you while you're down discussion.

Joey Giangola: Yeah.

Russell Duffey: "A, your pricing is going up. But while we're at it, these things that you had covered previously may not be covered," to your point. I think at the end of the day what's causing this is, carriers being unprofitable, right? And ultimately, up until we'll call it Que 2, when COVID really hit, and that gave it it's own dynamic. But ultimately, the rate environment was not keeping up with the loss cost of the carriers, right?

Russell Duffey: So ultimately there's only a couple of ways you can do that. You can either write more premium or you can be more profitable. Or, you can bring in investment income. Well right now, investment income is not that great. The other way to do it to be more profitable is to tighten your box, right? So, I used to write everything under the sun. When I wrote ... I'm a curator that writes restaurants, I'll write any restaurant you bring to me . Well now I'm only going to write white linen restaurants. I'm not writing bars and taverns, I'm not going to write liquor.

Russell Duffey: And then on top of that, you have a $25 million loan this year for the same price, I'm going to give you $5. So you're right, both of those dynamics are happening. And it depends on the ultimate insured, of which one is maybe the worst kick. But, the pricing is going up, and definitely terms are tightening.

Joey Giangola: Yeah. What does that look like in terms of them maybe looking to expand their partnerships? When they start losing options, and things like that. What advice would you have for carriers to be able to make sure they have all the information at hand? In terms of double checking, triple checking, the relationships they have and looking to find new ones. What goes into that process? And how do you suggest them to approach that and be successful with it?

Russell Duffey: Well also, there's kind of a double edged sword right there. As a carrier relations guy, I'm always pushing our teams to deal with who we believe our partners are. Because, we believe that adds value to our clients and ultimately the insured. And those long standing relationships, those insurance carriers, that if I rattled off all their names, you would know them all. You would know they're going to be there when the claim comes in.

Russell Duffey: But there is a capacity. One of the things that drives, sometimes, the market down, as far as the rating environment is, just excess capacity, right? So there's been a lot of capacity out there. And all of a sudden a lot of that capacity is shrinking and going away. You need to make sure ... Some of that capacity may still be there. The question I always tell folks is, "Are they going to be there when the claim comes in? Is that a partner that you want to put your insured with, and put their business with?"

Russell Duffey: "It's great that they have capacity for you right now." The double edged sword is, sometimes you might need that capacity, right? So in a market like this, we're looking for all the capacity we can get. But I can tell you we are ... There's a term that we are hearing more of these days called flight to quality. As more people see what's happening in the marketplace, leaving some of that capacity. I wouldn't call it questionable, I would just say it's new capacity. It's newer into the marketplace, and going to carriers that are long-standing players in the field and folks that you know. "Hey, through thick and thin, no matter what happens, I know they'll be there when it comes down to pay my client."

Joey Giangola: You touched on a couple of my favorite things. It's that, like you said, I've said those words many times. "Will they be there to pay the claim when you have it?" Yeah it's great that they're $50 cheaper, whatever the number is, right?

Russell Duffey: Right.

Joey Giangola: But then too, I want to bring it back to the whole profitability thing. In terms of, yeah there's a reason these prices are where they're at. How much of that do you think ... Let's say this, how much of that do you think is currently making it into, maybe in the last couple months? Was that part of the conversation that you think you were hearing from agents? Or, how much of that needs to be in the conversation now, in terms of talking about price as it relates to profitability for these carriers? And like you said, their capacity, and how that also impacts their ability to pay the claims when it does come time?

Russell Duffey: So let me make sure I understand the question. So is the question, how is the carrier profitability affecting that?

Joey Giangola: I mean, just in terms of the agent properly addressing that with their clients, right? In terms of just having that conversation back to the transparency, back to the communication.

Russell Duffey: Right.

Joey Giangola: How much of that do you think was going on before? My guess is a little bit to none. How much of it needs to ... How much of it do you think should be happening now?

Russell Duffey: Right. I think you would be correct. When there's a lot of capacity and there's a lot of quote options, I think there might be a tendency in the marketplace, by insured's at least, that aren't getting the right information to say, "I buy the insurance to have the claims paid. Right? So have them pay my claims." And that is the reason they buy insurance, make no bones about it. But if the retailer is not talking to their client about, "What can we do to help mitigate? You've had problems with your profitability Mr. Insured. By the way, you took in $100 last year, the insurance carrier paid out $300."

Russell Duffey: In a marketplace like this, that's not going to go well. It's not going to get you the favorable response that you want when your renewal comes up, right? So what are we doing to help mitigate that $300? How can I take that down to $50, so that carrier goes, "Okay, they are proactively looking at why they need to be a better risk for an insurance carrier." Right?

Russell Duffey: I would agree. I don't know that ... I think it's happening much more these days, not that it was always happening. Certainly on much larger accounts that have more defined risk management programs, of course they're doing that.

Joey Giangola: My favorite line was always in talking to somebody, "Hey listen, you paid them $5 grand in premium, and you had $100,000 medical procedure. You think they're just in the business of giving you $95,000 for free?" It's like walking into Wal Mart and having a shopping spree every time you go in.

Russell Duffey: Right, absolutely. And ultimately, if the carriers don't follow that, right? That's the whole idea of rates. If they keeps rates at a certain level and loss costs keep going up, but the carriers put themselves in this problem just as easily as we do, right, as anyone else.

Joey Giangola: Yeah, it definitely makes sense. So if you had to boil it down, in terms of the most critical areas to hit for an agent. In terms of that communication, what would be the one, two, maybe three things that you would think that they absolutely have to be addressing, maybe in order, during this time?

Russell Duffey: I guess the first thing, just from the quote process, right? I mentioned this earlier. You cannot have enough data these days, right? So the days of, "Hey, I think my payroll is $100,000, I'm not positive, it might be $125,000. I'll get you loss runs after the binder is issued," those days are gone. You've got to have very clean, very good data, be able to paint a picture for an underwriter.

Russell Duffey: Then of course we mentioned it, if you had profitability issues it's incumbent upon an insured and the retailer and the wholesaler in the process to make sure that they're showing a picture of why that risk is going to be better going forward. So what have we done? What is our risk management process to do better here?

Russell Duffey: Data though, I can't have a conversation with a carrier at all, about anything. It could be anything at all, and I can't have a conversation with a carrier where the word data doesn't come up. You cannot have too much data, or too good data, it is paramount right now to getting the best deal done in the marketplace.

Joey Giangola: All right Russ, so I've got two more questions for you.

Russell Duffey: Okay.

Joey Giangola: I'm kind of curious in terms of as you see it from, again, a market relations sort of standpoint. What is one thing that we're not necessarily talking about right now, in terms of improving it? What is around the corner? What are we looking to get to, to maybe change the dynamic? Where are we trying to go with these relationships, and how can we look to do a little bit better?

Russell Duffey: With our carriers?

Joey Giangola: Yeah, with the carriers, with you just in general. Again, everybody coming onto the same page. Is there something, like you said, to the data? Is there just a way that we're going about this, that could be enhanced, maybe made a little more streamlined? Is there something that you see that just kind of continually is a little hitch in the whole process, that might smooth things out a little bit?

Russell Duffey: Well if you talk about data specifically, I can tell you there are a lot of initiatives amongst carriers, amongst retailers and wholesalers, of how we more cleanly share data. Right? And that I think will be the next positive step that comes in our ... Where the data used to be, "Okay, the insured filled out an application. It got to the retailer, the retailer may do something with it. It goes to the carrier, it goes to the wholesaler." It's like a game of telephone, right? Sooner or later that data, somehow, someway, degrades by the time it gets to the place where the ultimate decision gets made, right?

Russell Duffey: So, that could be good or bad for the decision. It depends on how that looks when it gets there. I think what you'll see as we move forward is, almost real time ... Here's the data through the value chain, if it's shared exactly as it is, right? It still has to be good data because bad data in means bad decisions get made.

Russell Duffey: But that's probably the area where I think you'll see greater efficiencies in trading relationships. There always used to be this kind of thing of, "Who owns data and this is my account, this is your account, that's your data, that's my data." The reality is, if you want to get it done right it's kind of everybody's data. There are hurdles and barriers to certain things that you have to be careful of there, privacy type things. But when it comes to providing the best product, that transparency of data is going to be ... And it's being worked on now, but it's going to be probably the next thing that really provides some extra efficiencies into our bus.

Joey Giangola: All right, I have one quick question. If you had top give me just your best ball park guess, what's the timeline you think before we're maybe actively seeing that in a meaningful way?

Russell Duffey: I will tell you in some cases it's happening now. I would tell you, it is everybody's ... I'm the insurance guy, right? So me meeting with the IT guys they say everything they say, and the only thing that people care about is, "Okay, when do I have that?" Right? And they kind of hem and haw about it.

Russell Duffey: I would tell you that's certainly within ... that could be ... Some folks will tell you it's happening for them now in small bits. Certainly in the next 12-36 months, that's going to be more and more. 36 months from now, I think we'll be exchanging data way differently than we even are now.

Joey Giangola: All right Russell, last question to you. We've covered a lot, in terms of the market and the relationships behind it. I'm kind of curious, more specifically, about you and your viewpoint on things. What are you most excited about, as it relates to insurance, your role in it, and where do you think you want to ultimately reach out and get to that's kind of got you excited?

Russell Duffey: That's a good question. You know, it's interesting, I've been with my firm for 20 years now, right? I've had several different roles. The role I'm in now didn't even exist 3 years ago. I think for me, and someone that ran a branch and has really enjoyed teaching people the industry. For me, what I enjoy about this industry is, 3 years ago my role wasn't even in place for my carrier. Okay, 3 years from now, what roles will be required that opportunities for people within our company, people who are coming into our industry will have because of what happens with the efficiencies and the things that we do with IT? And the way that we approve how we do business?

Russell Duffey: I think our industry is always changing, and I think we get a bad rap. I think people hear the word insurance and they think of a dusty book. Somehow it's boring and it couldn't be further from the truth. The way things are going, you cannot do anything in this world without insurance. You can't buy a house, you can't buy a car, you can't start a business. You can get travel insurance to go on vacation. There is just nothing that happens, it's a social tool that has to happen. So, as the world changes insurance has to go along with it.

Russell Duffey: I'm just always amazed at how we adapt. 20 some odd years ago people thought that we were not going to need independent agents, we're not going to need wholesalers, whatever. And here we are, still just absolutely knocking it out of the park. So, what will the next 5-20 years hold for us?

Joey Giangola: Russell, I'm going to leave it right there. I appreciate it sir, that was a lot of fun.

Russell Duffey: Yeah. Appreciate it, thank you.