This is Part 5 of our Backbone interview with Joe of Guardian Insurance Solutions in Hilliard, Ohio — the carrier-lineup reality nobody warns new agents about, and how a hard insurance market actually works.
The carrier lineup nobody warns you about
Honisto: What’s the step in the first-year playbook that’s invisible from the outside — the thing aspiring agents don’t even ask about?
Joe: How tough it is to actually have a competitive carrier lineup. It’s almost positioned to where they want you to go after the big aggregators and the contracts that are tough to get out of and negotiate through. You’re just going to be in a spot where you might have three to five carriers. Maybe a few of them are non-standard, high-risk that you don’t necessarily want to be in, and you might get a preferred one or two here. And being independent, we’re supposed to thrive and pride ourselves on the ability to shop around and have competitiveness. But there were times in my agency in the first two years that I had to leverage just a few carriers. By few, I’m talking two to four carriers that I had to grow a book of business, a successful and productive book of business, off of before these other carriers would give me the time of day.
I got told when you start a scratch agency, you’re starting from zero. No clients, no revenue, only cost — both in time and money. And what I quickly found out within building the book of business was that it wasn’t until about the first two million of premium — sold premium — that the majority of carriers actually started to give you the time of day. They’d talk with you to entertain a contract, a relationship, whatever. That two million mark quickly became the goal for the agency. When you hit a million, it’s amazing. It might open up a few doors, but once you hit the two million mark, whether it’s through personal lines or commercial, it brings more conversation to the table.
But that’s something that I can see a lot, because I feel like most agents enter into it thinking that contracts are very easy to get. It’s not the case at all. The only thing that kind of helps out, if you’re not coming with a huge book of business, if you’re going to start scratch, is your experience. Here I am with a scratch agency, zero experience, thinking that I can just walk into any of these reps and they’re like, “Oh yeah, just sign this paperwork and we’ll give you our brand to sell and train you on it.” I was told no a lot. I just had to kind of roll with the punches. It doubled down into who said yes and who believed in us first.
And it worked. It worked really well. A lot of it was our timing, too. There are soft markets and hard markets to the insurance side, which, again, was brand new to me. Had no idea what it was, but I entered into a very good, soft-marketed territory. Within the end of ‘21 to ‘22, we quickly got into a hard market, and I had no idea what that was about. That came with underwriting, carrier shutdowns, underwriting restrictions, just enough that can make some agents pull their hair out and figure out where the heck they’re going to get business from. If it had not been for the positioning that we were in, that hard market would have been much harder for us to handle and to go through. Timing was very much on our side during that time.
Hard markets vs. soft markets
Honisto: Would you be able to explain what the difference is between a hard market and a soft market?
Joe: A hard market is when, most of the time, claims are going crazy, whether it’s through natural disasters or through differences in the economy that dictate payout. What we had experienced with the used car market during the aftermath of COVID, as the economy was reopening back up, is cars actually held appreciation. And when these carriers are paying out on ACV, if your car is actually appreciating or holding its value, those payouts are gonna be more, ‘cause that’s just how they’re going. On the flip side, when you deal with weather, you deal with fraud. Fraud was a very huge issue these last few years on the contractor side. When these carriers are also paying out for new roofs, new siding, new whatever, we had these fly-by roofers that would come through and say, “Yep, we can do this, do this. Your roof needs this,” or, “Your roof needs fully replaced,” and maybe it didn’t. It’s just terrible how bad integrity can be out there. But these carriers are going to do what they can to at least assess what they feel is a problem.
When a lot of the fraud occurred — I’m learning this from my roofing clients, my other contractors that are in the space, car salesmen, all kinds of people — you had supply chain shutdowns, supply shortages, used cars holding their value, just a lot of fraudulent activity going on the homeowner’s side through bad contractors. When all of this kind of hits at once, these carriers have to figure out how to prevent losses the best they can, and it’s them protecting their book. Unfortunately, when a carrier goes into protection mode, it’s going to affect the consumer and agents like us.
We had carriers that shut down new business for an entire year. We had carriers that changed up how they do the roof payouts on a much earlier basis. We’ve had carriers that just reformulated their algorithms. What’s new with the insurance world — not necessarily new, but more in our face these days — is it’s all algorithmized. When you plug and play our clients into these systems, one thing that this carrier might want just derails the whole quoting process. You might find yourself having one client thinking you have eight people to shop around, and through a hard market, those eight dwindle down to three. Do those three make sense for the price, or is it better for the client to just hang tight?
In a soft market, nearly everybody’s hungry for business. They loosen underwriting restrictions, reopen their products, and some even refix rates to where they can lower. Everybody wins in a soft market. In hard markets, there’s a lot of outflow that you can use. What I found with the bigger agencies during a hard market is the reshop game really picked up, because as everybody’s rates are going through the roof, everybody wants to figure out how to minimize. Sometimes reshop people will go to a different agency. We got a reshopper. Our agency specifically capitalized on a lot of the reshop market that was just going on. It doesn’t matter if it’s captive or if it’s another independent side. We were just positioned well to handle that reshop game, and we weren’t big to the point where we ourselves were dealing with that specific battle. So it was all new business to us in the hard market aspect. I’m sure the next hard market will be much different than the one that we experienced.
About the business: Guardian Insurance Solutions is an independent insurance agency in Hilliard, Ohio, serving personal and commercial clients across the Columbus area. Reach them at guardianinsuranceohio.com, 4694 Cemetery Rd #406, Hilliard, OH 43026, or 614-451-7100.
Related: Part 1 · Part 2 · Part 3 · Part 4 · Part 6 · Backbone Spotlight · The Backbone Series
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