Brokers and risk managers are in discussions with commercial insurers over potential recalculation of exposure values, premium rebates and premiums payment plans as economic activity has fallen significantly during the COVID-19 lockdown, sources say.
Responses from insurers vary, but generally they are more willing to negotiate changes on renewals rather than adjust in-force policy terms, sources say.
The variable reactions contrast with many personal lines insurers who have made across-the-board premium reductions for auto insurance customers to reflect reduced exposure due to decreases in driving since the beginning of the coronavirus pandemic.
“The commercial space is quite a bit different from personal lines or the very small-business space,” said Joe Peiser, New York-based global head of broking for Willis Towers Watson PLC, who said the broker is seeking relief for policyholders both on renewal business and in-force policies.
Requests for mid-term relief are being dealt with on a case-by-case basis, and the insurers are listening and giving some consideration, “but not a whole lot,” Mr. Peiser said.
“In our experience, there have been a few clients, particularly long-term clients in very distressed industries, where the carriers are responding with mid-term relief,” Mr. Peiser said.
Eric Spalsbury, director of risk management for cleaning company Stanley Steemer International Inc. in Dublin Ohio, said he is “in active discussions regarding any and all options for tempering the cost of coverage.” He added, however, “that being said, things are very fluid these days.”
Mr. Spalsbury said his company’s broker “has been invaluable in helping us better define exposure changes and in establishing the rapport with the carriers to communicate those changes.” He added that Stanley Steemer’s “carriers have been very receptive to our overtures in this regard.”
Any adjustments depend on individual policyholders’ exposures, their financial performance and how far they are into their policy terms, said Mike Rouse, U.S. property practice leader for Marsh LLC in New York.
“We’re discussing with markets on an account-by-account basis because so many variables come into play,” he said. “Everyone has been receptive to having the conversation.”
Changes to commercial insurance contracts must be negotiated individually, said Wendy Cook, central zone casualty practice leader for Marsh in Chicago.
“We have carriers which have been easy to work with, and it’s obvious they are trying to support clients,” Ms. Cook said. “We have other carriers out there which have been very difficult to negotiate and work with and don’t want to make any changes.”
In general, insurers are more responsive to adjustments made during renewals, such as collateral reductions, than with granting mid-term relief, Mr. Peiser said.
Collateral is held by an insurer against the retention maintained by the policyholder.
Ms. Cook said insurers are being deliberate and cautious.
“Some are hesitant to make changes now because they’re just not sure what it’s going to look like,” Ms. Cook said. “We’re in a challenging market as it is and a lot of accounts are marketing their programs,” and clients may well remember which insurers treated them well.
One area Willis Towers Watson is working with clients is rerunning loss projections, upon which certain collateral held by insurers is based, Mr. Peiser said. The broker is pressing insurers to reduce collateral requirements against retentions based on rerun loss projections. “We’ve had some success on that,” he said.
The brokerage is also deploying forensic accounting teams with some clients as some insurers look for more rigor on adjusted expenses, Mr. Peiser said.
“Business interruption worksheets can be more labor-intensive,” as insurers sometimes ask for more supporting information than previously or is already available, Mr. Rouse said.
Flexible payment terms are also on the table, sources say.
“The easiest thing to take care of off the bat is getting extensions on premium payments,” Ms. Cook said, adding that most insurers seem to be receptive.
Doug Ware, vice president of risk management in Boston for Suffolk Construction Co. Inc., a national contractor, said the company’s insurer has allowed it to spread premium installments out on coverage for a project that was enrolled in its program just before the COVID-19 outbreak became severe
“They’ve actually spread out those installments,” he said.
Exposure changes can in some cases be picked up on an end of policy audit, Ms. Cook said.
Mr. Ware echoed this, saying Suffolk’s account was large enough to be on audit, and exposure changes could be picked up during the audit at the end of the policy year.
More insurance and risk management news on the coronavirus crisis here.
