The desire to grow is less a wish than a necessity throughout the country, he pointed out. A “good-size regional firm” of 55 employees, Scanlon-Guerra-Jacobsen recently purchased three agencies that succumbed to the reality that they needed to merge to survive.

He explained that small independent agents have no problem handling personal lines, but commercial accounts demand time-consuming risk management services. “[Agents] have the choice of having the services or risk losing the accounts,” he said.

Those agencies without risk management services are “totally at the mercy” of the markets and have no leverage with insurers, according to J. Kipp Wall, vice president and sales manager with Aler Wall & Shonter Insurance Inc. in St. Petersburg, Fla. For example, large property insurance clients are increasingly turning to the assigned risk pool or are forced to pay increasingly higher deductibles, he said.

“The power between the agency and the insurer used to be 5050,” but that power now has shifted almost totally to the company, Mr. Wall said.

Agents, he added, are doing their best to keep up, but it is not easy to adapt even for those who offer special services.

For example, even agents who arrange for captives are not immune to market forces. One property account, Mr. Wall said, sought reinsurance for their captive, but the company wanted terms that excluded risks such as nuclear, biological or terrorist attacks. The reinsurer issued a non-renewal and the captive is now working to “figure out something.”

“At this point I would term the market in a minor crisis, but we cannot have another disaster or we will be dead in the water,” Mr. Wall observed.

Having risk management services available was not as critical for an agency just three years ago, observed Tod Austin, senior vice president and one of the principals with Hackett, Valine & MacDonald, in South Burlington, Vt.

The call for loss control services is now greater, he said, estimating demand is up 30 percent or more. But with three professionals on board and demand for services high, it is difficult to give the same level of service to all accounts, he acknowledged. The agency nevertheless strives to assist all accounts in implementing procedures that meet the underwriters concerns and qualify them for the line of insurance they need, he said.

Mr. Austin noted that even with the agencys best efforts, the top clients–those with a clean loss history–are seeing premium increases between 20-to-30 percent. “Insurers are asking questions they have never asked before,” he explained, warning that if an insurer gets a negative answer, a quote will not be issued.

The client being hurt the most is the “small guy” who insurers simply dont want to touch. One example, Mr. Austin said, was a small-business owner with a clean record who had previously paid $5,000 in premium for workers comp. “No one wanted it,” he said. For coverage, the agency “had to turn to the surplus lines,” where the premium was doubled.

An agency with in-house risk management services has an advantage when competing against other agencies, Mr. Austin pointed out. A few years ago, in the middle of a soft market, it didn't matter as much, but now those services are essential to clients looking for risk-transfer and loss control alternatives, he said. Risk management services, he noted, have helped his agency thrive during the hard market, with evidence of record new-business sales last year.

For example, larger clients needing help finding alternative markets have access to Yankee Captive Management through the agency, Mr. Austin said.

Buyers are being asked a lot more questions now about safety factors, agents noted. The questions range from procedures for evacuation and training, to whether it is feasible to purchase gas masks, staff respirators and parachutes for evacuation from a building, according to Robert P. Miata, president of Consolidated Risk Management Inc., a consulting service in West Hempstead, N.Y.

Clients are also concerned about security for mailrooms, shipping and receiving, and screening individuals entering their buildings, he noted.

Agents might have to walk many of their clients through a “vulnerability analysis” to determine what needs to be done, in what priority order and at what cost, according to Mr. Miata. “You cant just pull someone off the street and pay him or her $5 an hour,” because that person needs to know how to recognize someone carrying a disease agent, he said. “There is a whole new way of considering how you go about protecting yourself.”

All this work and evaluation can pay off by helping an agent convince an insurer to retain a risk with a reasonable price and coverage terms, but there is no guarantee. “It is much tougher [to obtain insurance now] than in a [normally] tightening market,” Mr. Miata said. “Insurers are not just looking at loss ratio. It is truly risk evaluation.”

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, May 13, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.