Why does obtaining a quote from excess and surplus lines take so long?
Obtaining a quote from Excess and Surplus (E&S) lines insurance can take longer than standard market insurance due to several factors unique to the E&S market. E&S insurers handle non-standard risks that the admitted market often declines, requiring more detailed underwriting and customization. Here’s why the process may take longer:
1. Non-Standard Risks Require Detailed Underwriting
Complexity of the Risk:
E&S insurers specialize in unique or high-risk businesses that don’t fit standard insurance guidelines (e.g., niche industries, high-risk activities, or businesses with poor loss histories). These risks require more detailed analysis, often including customized coverage terms.
Underwriting Flexibility:
Unlike admitted carriers, E&S carriers don’t follow strict rate filings and policy forms. This flexibility means the underwriting process is often more detailed and manual to assess risks accurately and tailor the policy.
2. Extensive Documentation Requirements
Submission Package:
E&S markets often require a comprehensive submission package, including:
Detailed application forms.
Loss runs (typically 3–5 years of history).
Supplementary questionnaires.
Risk management practices and other operational details.
Gathering and submitting this information can take time, especially if the insured doesn’t have it readily available.
Additional Requests:
After the initial review, underwriters may request additional information or clarifications, delaying the process.
3. Limited Automation
Manual Processes:
Many E&S insurers rely on manual underwriting processes rather than automated systems. This increases the time needed to review submissions, analyze risks, and prepare quotes.
Specialized Expertise:
E&S underwriters often involve more human judgment to assess non-standard risks, which adds to the timeline compared to standard market automated quoting systems.
4. Market Conditions and Capacity
Underwriting Capacity:
E&S markets are often constrained by capacity, particularly in high-demand sectors or during hard markets. This may lead to longer wait times as underwriters prioritize submissions.
Reinsurance Dependency:
E&S carriers often rely on reinsurance to manage large or high-risk policies. If a risk requires facultative reinsurance, the carrier must consult with reinsurers, adding to the timeline.
Multiple Carrier Submissions:
Brokers may need to shop the submission to several E&S carriers to secure the best terms, and each carrier has its own review process and timeline.
5. Unique Policy Customization
Manuscript Policies:
E&S policies are often customized or "manuscripted" to address specific coverage needs. Drafting, reviewing, and approving these customized terms can take time, especially for complex risks.
Pricing Negotiations:
Premiums in the E&S market are not regulated, so pricing is more fluid and may require negotiations between the broker and the underwriter to arrive at terms acceptable to both parties.
6. Broker Involvement
Wholesale Brokers:
E&S policies are typically placed through wholesale brokers, adding an additional layer of communication between the retail broker, wholesale broker, and carrier. Each party's involvement may introduce delays, especially if communication or documentation is incomplete.
Negotiations:
Wholesale brokers often negotiate terms and pricing with multiple carriers, which can extend the timeline.
7. Risk Mitigation and Inspections
On-Site Inspections:
For high-risk properties or operations, E&S carriers may require on-site inspections before quoting. Coordinating these inspections and reviewing the findings can delay the process.
Risk Control Recommendations:
Some quotes are contingent on implementing risk control measures, which may require time for review and compliance.
8. Regulatory Considerations
Non-Admitted Market Rules:
E&S insurers operate under different regulations than admitted insurers. While they are not bound by state rate filings or policy forms, they must comply with state surplus lines laws, which can add complexity to issuing quotes and policies.
How to Expedite the Process
Submit a Complete Application:
Ensure all required forms, loss runs, and supplementary information are accurate and complete at the outset.
Work with Experienced Brokers:
Experienced wholesale brokers understand the E&S market and can streamline communication with underwriters.
Anticipate Additional Information Requests:
Be proactive about gathering additional documentation that may be requested, such as safety protocols or financials.
Communicate Effectively:
Maintain open and timely communication between the retail broker, wholesale broker, and carrier.
Plan for Longer Timelines:
Understand that the E&S quoting process is typically slower than standard markets and plan coverage needs accordingly.
Summary
Obtaining a quote from the E&S market takes longer because of the need for detailed underwriting, customized coverage, and extensive documentation for non-standard risks. By preparing thorough submissions, working with experienced brokers, and maintaining proactive communication, businesses can help streamline the process while ensuring they receive tailored coverage that meets their unique needs.