Rebsamen Ins. to release state of the market report

Rebsamen Insurance of Springfield, formerly Thomison Insurers, will release its annual state of the insurance market report and forecast this month, according to John T. West, president of Rebsamen's Springfield office.

Rebsamen acquired Thomison Insurers in April 1998 and the company is now making the change to its new name.

Rebsamen Insurance was founded in 1928 and has grown to be the largest independent broker in Arkansas and operates out of four locations the local office, Little Rock, Ark., Ft. Smith, Ark. and Springdale, Ark.

"Rebsamen began providing this report in the mid-'90s, when the insurance market started to free-fall. We wanted to be able to advise our clients about what was going on and what they can expect from our industry," West said. "As the industry started to turn around and harden, clients are now facing cost increases and we want them to be able to budget for that. This report allows us to inform them about cost increases so they won't be blindsided by them."

West said Rebsamen's policyholders are about 60 percent commercial property and casualty, 30 percent individual life and health insurance and 10 percent personal item insurance.

According to the report, the massive consolidation trend in the insurance industry will continue, if not accelerate.

The consolidation has been driven by the industry's accumulation of huge amounts of excess capital, which has caused rampant price competition in the last 10 years.

Unable to raise prices, the industry has attempted to reduce expenses by consolidating. While the industry's capital position improved dramatically during the 1990s, premiums declined in a similarly dramatic fashion, and many carriers are now experiencing poor cash flow as a result of increased losses, coupled with weak premium growth.

Further, there are indications that the rate of inflation in health care costs and wages is increasing.

The report states the insurance industry is reacting to the situation by raising prices and being more selective in the risks it underwrites, or "hardening."

The report's advice for finding solutions in the hard insurance market includes reaching a level of security by knowing the insurer.

Rebsamen recommends selecting an insurer that has a minimum A.M. Best rating of B+ and minimum policyholders' surplus of $50 million.

Controlling losses is also advised before the insurance market hardened, underwriters used relaxed standards when gauging risk.

Now underwriters are being forced to raise standards and loss records are being scrutinized much more closely, according to the report.

Knowing total cost of risk, which is the sum of an individual's or company's premiums plus the total of all losses falling within deductibles, can also help get the best possible deal from an insurance company.

The report advises insureds not buy insurance solely on the basis of hard dollar premium costs or deductible levels calculate total cost of risk, then factor in other variables, such as financials, tolerance for risk and the degree of confidence in predicting future losses.

Readjusting expectations by not insuring expected losses is also recommended by the report.

In a hard market, insuring expected losses is much more expensive than retaining them via a deductible.

Avoiding the insuring of expected losses is a buying technique, the report states, that has application in a hard market, and should be used in conjunction with the total cost of risk analysis technique to confirm the best deductible option.

Negotiating renewals early will allow underwriters to be more flexible if they know the targets they need to hit in order to retain the insured's business. The lack of renewal deadline pressure helps create a more relaxed atmosphere that should assist in negotiations. Also, if the negotiations don't pan out, there is enough time for the insured to find another provider.

The report's last piece of advice for insureds is to approach the market intelligently and not buy insurance as a commodity.

Underwriters now are driven to achieve profitability and reduce expenses, and they therefore work on accounts they know they have a reasonable chance of writing, and pass on accounts they have unsuccessfully quoted year after year.

The report states that the best results for the insured will be achieved when working with the incumbent insurer and a minimum number of carefully selected other companies.