By Jon Borgen
Assistant Vice President of Commercial Lines
General Casualty Insurance Companies
Do you think of Business Owners Policies (BOPs) as low-premium accounts that won’t make you any money? Too labor intensive? More trouble than they’re worth?
Don’t be so quick to judge. This line is evolving so fast it hardly resembles the BOP of 20 years ago. Today carriers are doing all they can to turn BOPs into easy-to-write “sleeper insurance” policies that you can book quickly and then not worry about.
Take a second look:
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BOPs tend to pay higher commission than other commercial lines policies. (At General Casualty we pay 20 percent.)
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They’re profitable, with a long history of good loss ratios. For example, our experience shows significantly better loss ratios from our small account book than our large account book over the past five year.
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They diversify your portfolio.
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There’s a lot of opportunity. The estimated 24.7 million small businesses in the United States represent 99.7 percent of all employers, according to the U.S. Small Business Administration, October 2005.
Faster to write
Perhaps the biggest change we’ve seen with BOP in recent years is the move to online quoting and submission by many carriers. Many include online manuals or built-in eligibility guidelines so there’s no digging through papers or trying to quote a policy the carrier won’t consider. Some also have supporting lines – like commercial auto and workers’ compensation – available online. This has increased the speed of doing business like nothing else. One agent told us that when using an online system, she has a quote in hand in about 15 minutes. If the customer takes it, in a few more minutes she finishes the online app and then issues the certificate of insurance with the system-generated policy number. She compared that to the “old way,” where it takes about 45 minutes to fill out a paper application and then she has to mail it and wait two weeks to hear back from the carrier.
Another way carriers are making BOPs less labor intensive is by offering multi-year policies. General Casualty offers a three-year contract, which has been key to improving efficiency. Longer-term policies eliminate the need to go through the renewal and re-underwriting process every year. The selling point for policyholders is that they’re guaranteed a certain premium amount for multiple years.
More sophisticated
BOP has also grown to meet small business owners’ increasingly complex needs. For example, in addition to standard property coverages, some now include equipment breakdown coverage. Insurers are also beginning to include employment practices liability (EPL) coverage to protect companies from lawsuits involving sexual harassment, discrimination, wrongful termination, etc. We now include a $100,000 blanket limit for minicomputer, outdoor signs, accounts receivable, fire department service charge, recharging of fire extinguishers and valuable papers and records coverages.
Based on current trends, we believe BOP will continue to grow more sophisticated as carriers increase their eligibility to include additional business segments and larger companies. BOP isn’t just for mom-and-pop shops anymore; it’s for multi-location operations with dozens of employees and a fleet of vehicles. At General Casualty we base eligibility on property limits – and they’ve almost doubled since 2004.
BOPs shouldn’t take your agency a lot of time to write. And they should include all the essential coverages your small business customers need. When both of these are true, your agency can make good money by increasing your BOP portfolio. We’ve seen this firsthand – one agency of only 15 employees qualified for 10 spots on our latest incentive trip, thanks to its hardy BOP book.
For more information contact Anne M. Smith.