Excess and surplus (E&S) insurance is a kind of insurance that covers businesses with unique and uniquely high risks. Purchasable by individuals and companies, this insurance is for those who pose a financial risk that’s too great and/or too rare for standard insurance.
This article will cover excess and surplus insurance benefits, misconceptions, and proper timing as to when it’s appropriate to purchase this coverage. If you’re a broker offering E&S to clients, the information below will equip you to communicate its advantages to clients.
Clearing Up Confusion on Excess and Surplus Lines Insurance
Excess and surplus lines insurance covers policyholders that have unique risks, extra high risks, and/or poor loss history. These candidates would generally be unable to obtain insurance through standard lines, meaning that there’s a huge gap in coverage for them.
But why is this?
Examples of reasons that traditional licensed insurers might refuse coverage include the policyholder:
- Being a small/new business without a track record
- Having specific risks (such as roofers)
- Having high risks (such as general contractors)
- Being unique, unknown, or novel
In such cases, there may be a loss history showing that the policyholders in question are likely to file claims, or perhaps they have inadequate loss history and therefore their insurance coverage is difficult to price.
This is, unfortunately, why so many traditional insurance companies avoid covering them.
Yet, even in seemingly uninsurable situations, there is the possibility of obtaining coverage with E&S insurance, which addresses these situations.
Better yet, E&S insurance has many benefits.
High-Capacity Risks
There are some instances where high-risk businesses can’t obtain standard insurance because their coverage needs are far greater than the options offered to them.
In such cases, E&S insurance can offer higher coverage limits than standard insurance policies because insurers recognize that these clients will have different needs than the average policyholder. This coverage can be especially valuable for businesses with substantial assets or liabilities that require extensive coverage.
Unique Risks
Beyond custom coverage, this flexibility in excess and surplus lines coverage also allows for quick adaptation. E&S insurance is more adaptable to changing market conditions and emerging risks. They can quickly respond to new or evolving risks that traditional insurers might not have incorporated into their coverage offerings yet.
Therefore, offering excess and surplus lines insurance can give your company a huge competitive advantage.
You could be a high-tech solution for those that need coverage on short notice, cater to unique businesses that aren’t able to find coverage via traditional insurers, and carve out a niche in the market.
Examples of niche businesses that can benefit from E&S coverage are those that work in:
- Construction
- Building
- Roofing
- Commercial transportation
Offering excess and surplus insurance gives your firm an edge over the competition and benefits both the broker and the customer.
Nonstandard Risks
Clients with high-risk businesses have a need for underwriting flexibility and customized coverage. Traditional insurance cannot and will not be a good fit for them, making the process of finding insurance difficult.
Surplus lines insurers can tailor policies to specific needs and create customized coverage solutions that are unavailable through standard insurers.
Brokers can take up the challenge of bridging the gap between clients and insurers and help these clients find the coverage they need.
Choosing the Right Coverage
For many businesses, a comprehensive and robust insurance plan is what guards against a single high-risk accident leading to bankruptcy.
While excess and surplus lines insurance is a must for businesses with unique risks, note that it’s not a substitute for commercial auto, general liability, or other standard coverage. It’s comprehensive, but not to the extent that other forms of insurance are no longer needed.
Rather, it’s a specialty line that addresses specific hard-to-place or high-risk instances. The flexibility and customization that it offers make it the perfect pairing to be used in conjunction with standard coverage rather than instead of it.
Closing the Deal with Excess and Surplus Insurance
It’s essential for businesses with unique needs to realize that insurance solutions exist for them. With your help, they can thoroughly identify their risks, understand the benefits of addressing them, and find the right solutions for their situation.
This process may once have been difficult, but there have since been leaps and bounds in the technology within the E&S market. Automation, digital platforms, and analytics expedite the process and improve the customer experience greatly.
Cochrane & Company is among those leading technology advances to ensure that E&S distribution keeps pace with the changing digital economy.
With over six decades of commitment to embracing excess and surplus trends and providing innovative solutions, Cochrane & Company is honored to act as a trusted partner for insurance brokers, navigating the evolving landscape of the E&S insurance market together.
Licensed in all 50 states, we proudly serve clients across the nation, providing personalized and powerful solutions to help you become an even better partner for your clients. Speak to one of our experienced professionals today by calling (855) 967-0069.
