The last few years have brought change and uncertainty to business, creating “a hard market that affects every line of insurance” according to Poms & Associates Insurance Brokers Chief Executive Dave Poms.
“So not only did we have to deal with COVID, but now we’re dealing with very, very hard market conditions that most people in the last 15 or 20 years never experienced, because we’ve been in a pretty soft market for a very long time,” Poms said, whose agency ranks No. 3 on the Business Journal’s list of Insurance Brokerage Firm.
The challenge now, Poms said, is having relatively newer employees acclimate to a tougher market and working clients through tough news. He added that profit ratios have tightened among insurance firms, which has caused a need to recover via higher premiums and increased deductibles.
A line of insurance that stands out to Poms for its volatility has been property casualty, which has been subject to the wrath of severe wildfires, hurricanes, tornadoes and hail.
Wind and hail were collectively the most common insurance loss in the U.S. from 2016 to 2019 according to Insurance Services Office, a subsidiary of Verisk Analytics. That trend may have persisted, as Poms added that hail was the peril that contributed to the largest amount of insurance losses in the property insurance marketplace.
Liberty Co. Insurance Brokers Managing Partner Jonathan Axel wrote in email to the Business Journal that the firm has identified pockets of volatility in the insurance industry – wildfires in California and windstorms in Florida and Texas.
“Additionally, cyber insurance premiums have skyrocketed as carriers realized they were underpricing these policies,” Axel wrote. “In every case, we’re working with new carriers that are willing to deliver value to our clients and offer coverage where others will not.”
Liberty ranks No. 6 on the list.
Poms also made note of how the increased need for cyber insurance is impacting daily operations for the agency, noting that it has been one of the most challenging lines to deal with.
Mitzi Like, chief executive at Santa Clarita-based LBW Insurance and Financial Services, No. 11 on the list, said that her firm has been selling plenty of cyber coverage.
“Cyber is getting stricter requirements now because there have been claims in the industry,” Like said. “But at the same token, we have a lot of commercial accounts that need to have the coverage.”
Like added that in addition to being hacked, companies also face the risk of extortion when their systems are kidnapped.
“It’s really existent in the world now and now everybody is getting policies for it because the normal packages have a very small amount of cyber coverage,” Like said. “It’s more like a throw in, like part of a bucket.”
Busy market
Like’s firm has stayed busy throughout the last year and done its best to stay adaptable to changing policies and clients that have seen their businesses suffer or prosper.
“We’re seeing people who are doing very well in business, so we’re having to react and make sure that they’ve got the best coverages and the best pricing,” Like said. “There’s just a lot going on. We really haven’t had a lull.”
LBW has been in business for 100 years with three generations of family currently working for the firm. “We may not be the biggest agency, but bigger doesn’t mean better. So, we do feel that we’re a boutique agency operating in several great niches, where we really can make a difference to the client,” Like said.
Such a long ownership legacy is becoming less common, as mergers and acquisitions have taken off in great quantities, according to both Like, Poms and Axel.
Poms, whose firm has been in business for more than 30 years, said that the number of mergers and acquisitions he has seen in the last five years has been unprecedented.
“That pressure, sometimes from shareholders or investors trying to capitalize on this marketplace, has been challenging for me as an owner, because I don’t want to sell,” he said, adding that his main concern is maintaining a strong culture of employees and clients.
An insurance outlook report by Deloitte found that there are no signs of merger and acquisition activity slowing down this year.
“The deal marketplace is replete with abundant capital and willing buyers for asset classes that provide a rate of return commensurate with the risk, even though the competition for high-value targets may be fierce and inflationary concerns may complicate the valuation process,” the report stated.
Competition and inflation are likely to drive up prices further according to Deloitte, noting that buyers should be prepared to “write a big check relative to the opportunity.”