If you ask a child what scares them most, they will likely say some monster under their bed or in their closet. Ask an insurance agent the same question; they will likely say writing Excess and Surplus lines (E&S). According to WSIA, E&S saw $115.6 billion in written premium last year. So why do many of us share this aversion to E&S? Let's uncover why we may be so trepidatious about E&S and what we can do to expel some of the frights to expand our business.
Fear of the Unknown - the Monster Under the Bed
Venturing beyond our comfort zone can induce anxiety, leading many to cling to familiarity. This tendency extends to the realm of insurance as well. For instance, even if it may be more financially prudent to explore different markets for our personal home and auto policies, we often choose to stick with the same carrier we are familiar with. After all, why fix something that isn't broken, right? However, this line of reasoning disregards the fact that the admitted market is showing signs of vulnerability. In high-severity states like California, Louisiana, and Florida, carriers are withdrawing from property coverage. Meanwhile, in other states, they impose age restrictions or non-renew policies due to losses or claims, leaving insurance agents in disarray. This is where E&S insurance comes into play. The primary function of E&S insurance is to provide insurance for insureds who cannot find coverage through the standard market. As of 2024, the surplus lines insurers' market has nearly doubled over the previous 20 years, accounting for 12% of the direct written premium of property and casualty, equipping agents with the necessary monoline and package policies to serve their clients (WSIA, 2024). Without surplus lines, many insureds would be left without any coverage. Year after year, E&S is evolving into a valuable resource for agents, transforming from an unfamiliar and unexplored territory into an accessible safety net.
Fear of High-Risk - the Monster in the Closet
Another factor that may contribute to our avoidance of E&S is the absence of regulation and state backing. Agents do not want to leave their clients without coverage if a carrier becomes insolvent. However, this statement is not entirely accurate. E&S is regulated, as insurers must meet specific financial criteria and licensing requirements that the NAIC (National Association of Insurance Commissioners) sets to underwrite surplus line policies. While state guarantee funds do not protect E&S non-admitted policies, it is improbable that these insurers will face insolvency, unlike many of their admitted counterparts. Just last year, 11 admitted markets faced financial setbacks while no E&S companies did. Since 2003, only one E&S company has faced impairments compared to 302 admitted companies (WSIA, 2024).
There is also a significant advantage to not being bound by state filings and rules. E&S carriers can offer greater flexibility in rating, allowing insurers to set pricing and apply rules more freely than strict admitted ratings. This gives you more negotiating power when securing the right coverage and price for your clients, as you would otherwise be limited in options with admitted markets. More options don't seem so scary, right?
Fear of the Unpredictable - the Monster Lurking in the Dark
One of the main reasons we hesitate to explore E&S markets is that we perceive the process as unclear and confusing compared to standard markets, which have familiarity and predictable routines. However, with E&S, we have to navigate through unique supplemental applications, which can be time-consuming and require effort. Standard markets offer convenient direct bill options, while E&S can sometimes give us agency bill nightmares. Admitted markets are known for being more affordable, whereas non-admitted markets come with shockingly high premiums. But here's the thing: these beliefs don't always hold true! Technology can create uniformity and predictable processes. Many E&S carriers embrace technology to enhance the agent experience, offering simplistic quoting and multiple price options. So, let's dive into our favorite E&S market and discuss it further…
Pathpoint - Lighting the E&S Path
Pathpoint alleviates the apprehension surrounding small commercial E&S markets. Our mission is to simplify and streamline the E&S process, providing agents with an easy-to-use digital platform that mirrors the experience of an admitted market. Vanquish the ghosts of completing multiple ACORDs - with Pathpoint, agents can effortlessly upload existing forms or create new ones online. The information is swiftly processed, and agents can expect multiple quick quotes or a prompt response from an underwriter - on the same day. Our commitment to efficiency means that by the end of the day, a solution is provided, often accompanied by a binder and policy. All quotes are provided by AM Best A-rated or better carriers, adding an extra layer of assurance to agents. To further enhance the E&S experience, Pathpoint offers live chat support, a Mix and Match quoting tool, and time-saving features like the End-to-End E-Signable Binding Experience. You are also never alone in your E&S journey, as an Account Manager is devoted to helping you with your accounts (we added 12 new Account Managers this year to better serve our agents). We aim to value agents' time, enabling them to focus on their clients, effectively manage submissions and payments, and devote more energy to other profitable aspects of their business. Experience the Pathpoint Way - a seamless, efficient, and technology-driven approach to placing small commercial E&S. And most of all, not frightening!
Treat Yourself to a Modern Approach to E&S
Fill your bucket with the digital E&S solutions provided by Pathpoint. Expand your small commercial book with an admitted-like placement from top-rated carriers. Embrace offerings from innovative technology, allowing you to uncover the best prices in one place. Enjoy a simplified quoting and binding process for your small commercial accounts. Most importantly, conquer any E&S obstacles (real or imagined) to provide your clients with the best coverage imaginable fast and effortlessly.
Speak with a regional Account Manager to learn how to overcome E&S scares with Pathpoint!
WSIA (2024, September 13). AM Best report available for WSIA members. WSIA Education Foundation. Retrieved September 30, 2024, website