Producer Update: Issue 5 – 2022

Many of you have asked how PLM fared after Hurricane Ian’s strike through Florida and up the East Coast. It is typical when a storm (any storm) of this magnitude appears on our radar, we proactively reach out to insureds that may be affected in the geographic area. Prior to any “season” we send out tips and ideas that we feel can help our insureds prepare their business for the weather event of the season whether it is hurricanes, tornados, wildfires, etc. When a weather event is approaching, a weather alert email is sent out with tips on last minute things they can do before the storm hits as well as important claims and contact information. This is then followed by a phone call from our customer service team where they provide additional resources before an event occurs. At the same time, our claims department is setting up teams of independent adjusters to get into the area as soon as the storm or event clears so we can be on site quickly.

Once the event occurs, we are back on the phones inquiring about the health and safety of our customers, their employees, and their families as well as any damage the business might have sustained. We begin taking loss reports and starting the claims settlement process. Then the race is on as we try to get our insureds’ businesses back up and running as quickly as possible. I have said many times that a claim is not like a bottle of wine, it doesn’t get better with age!

To date, Ian has resulted in just over 30 claims (lower than expected) which we’ve established reserves of almost $8 million (higher than expected) on a gross loss basis. A portion of this loss will be paid by our reinsurers, thus the impact on PLM will be less in the short term. However, reinsurers have a long memory, and we know they expect to get paid back over time.

Ian looks to be an event of major consequence, in excess of $40 billion to the insurance industry. This of course is before the National Flood plan kicks in, and FEMA begins to issue checks. Keep in mind who is footing the bill when these things happen. I am seeing numbers in excess of $50 billion and as high as $70 billion in the end.

The question then becomes, what’s the impact to the reinsurance market, and how might that impact PLM and other insurance companies going forward? What does that mean to the ultimate consumer, in this case your clients?

We expect pricing across the board in the reinsurance marketplace to rise. Anybody who tells you anything different is simply not staying attuned to what’s going on. Weather-related activity throughout the United States and the world has resulted in devastating losses that the reinsurance community has had to pay for. It’s so bad that several major reinsurance companies have announced they are withdrawing from the property and property catastrophe business. Inflation, social inflation, rising medical costs, increased cost of vehicles, replacements parts, and building materials are all rising and are putting upward pressure on claims costs not only on the property, but also on the general liability and commercial auto marketplaces.

If that’s not enough, because of the substandard returns for investors from poor reinsurance experience over the last several years, and due to rising fixed income interest rates, investors are pulling their support (funds) from reinsurance markets and refocusing them in areas where they can generate a better risk return scenario. Thus, capacity or supply is being reduced.

What we are all faced with is a reduction in supply and increased demand. Simple economic theory tells you that it will result in price increases both in the reinsurance marketplace and the primary insurance market.

PLM’s financial results at the end of September are a bit behind where we would like from two specific angles. First, the underwriting loss is higher, at about $9 million, than we would like at this juncture. This is due to continued problems in the commercial automobile line as claim reserves develop upwards, and new reserves are set higher in anticipation of the costs associated with settling those reserves. Juries continue to hand out huge awards that makes it more difficult to try cases to a satisfactory result and thus more pressure is applied to settle the case before going to trial. It’s a catch-22 situation, one in which we have a responsibility to protect our insureds’ interests and to do so within policy limits. From an expense viewpoint, our claims expenses are down just over 11%. Likewise, the expenses to run PLM are in great shape when considered against soaring premiums and due to the continued conservative fiscal management by the PLM leadership team.

As indicated, premium is surging. We’ve written over $17 million in new premium on a year-to-date basis. While this is a bit behind target, we believe we will be in fine shape by year-end. Account retention and the premium associated with those accounts are both well above 90%, and well above industry averages, thus fueling additional premium growth. Further we are seeing significant endorsement and premium audit activity that is positive in nature. Many insureds have come to understand the need to increase coverage on their property, including buildings, contents, machinery, and stock. In addition, they are experiencing robust sales that positively impacts general liability premium. We will easily exceed our production target for the year.

Unfortunately, the investment market has not been as kind, and we have seen a significant drop in the value of our mark to market securities. The value of our fixed income investments is also under significant pressure. We are not alone in that there is simply no place to hide in the investment marketplace, particularly if you are trying to manage your investments in a conservative manner. The carnage is being felt by most investors, professionally and personally. However, we are optimistic that this market will come back over time and remain steady in our approach to managing our portfolio.

We are pleased with our net promoter score (NPS) at 65.7, well above the industry average. While some of our brokers and insureds are beginning to push back regarding the number of surveys we send out, our effort here is to establish a system that will provide us with feedback that we can use to understand individual, departmental, and corporate training and development issues. In today’s post-COVID world, customer service seems to be slipping in many ways for many businesses. The entire PLM team is committed to keeping that from happening! I do not know about you, but I am tired of bad service, or people telling me that their service is poor because they cannot find people. I am also tired of hearing from service providers about how busy they are. It’s time to get back to pre-COVID values and understand that service sells, and as customers we are all entitled to good service.

We continue to be pleased by the work we are doing within our agency, ABM, where we have added staff and reorganized the structure to provide a more consistent, stable workers’ comp market to more of our brokers and insureds. This past year we also began to provide coverage to risks within the wood niche that do not qualify for consideration by PLM, bringing more coverage options to businesses in the wood industry.

I very much appreciate the loyalty demonstrated by so many of our brokers and insureds and look forward to continuing to enhance the value that our stakeholders have come to expect.

As always, if you have any thoughts or comments, please do not hesitate to reach out to me at jsmith@plmins.com.