Conditional Non-Renewal:  Offensive Defense

In a move designed to improve underwriting results, carriers are issuing conditional non-renewal notices.

This is attributable to a recent spate of CAT losses,  tough reinsurance renewals and a shrinking marketplace.

By notifying insureds that the policy at issue will be subject to material changes, a carrier can start to move away from a class of business and weed out unprofitable risks.  Conditional non-renewals will often entail changes in limits and deductibles, new or modified exclusions, modifications to coverage terms, premium increases or other items adverse to the interest of the insureds. These are distinct from pure non-renewal notices, where a carrier declines to renew a specific risk altogether.

Insureds should be informed and prepared for the possible receipt of conditional non-renewal notices. Being caught off guard can cause an insured to misunderstand the market or the renewal process.  It is important to remember that in a changing market, a conditional non-renewal often serves as the opening gambit of the insurance renewal process.  A single carrier does not dictate the will of the insurance marketplace.  The potential for competitive pricing or beneficial terms and conditions still exists.

That said, competition will increase as capacity narrows, thus insureds should start their renewal process earlier than usual this year.  They should be familiar with the developments that are causing underwriters to shy away from certain risks and be able to explain why their particular risk should not be stereotyped.  Understanding the marketplace is the key to effective risk positioning and effective renewal strategies.

Given the present climate, the best defense is indeed a strong offense.  Be prepared and be sure to communicate early and often to the insured.  An early and frank discussion about the potential for a notice and how best to handle it will be important.

Preferred Brokerage has significant experience navigating a changing insurance marketplace.  We would be pleased to discuss upcoming this market trend and its impact to your clients.  Contact us today to learn more.

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