Why Excess and Surplus Lines are the Future of Small Business Insurance

By Pathpoint


What are Excess and Surplus Lines?

First things first: what is excess and surplus lines insurance? Simply put, it's insurance that's not available through traditional insurance carriers due to its unique nature or perceived risk. These policies are instead provided by non-admitted insurers, which are not licensed in a particular state but may be authorized to provide coverage there. Because these insurers are not subject to regulation by state insurance departments, they can offer coverage for situations that are too complex, too specialized, or too risky for traditional carriers to want to cover them. One example of coverage that usually falls into the E&S bucket is General Liability insurance for Roofers; it's a risky business and therefore almost always needs to come from the E&S market.

Why Traditional Carriers are Shying Away from Small Business Insurance

So why are traditional insurance carriers not stepping up to the plate for small businesses anymore? There are several factors at play. For one, small business insurance is a relatively low-profit business for carriers. Smaller policies don't generate the same returns as larger ones, and smaller businesses are less likely to shop around for deals, meaning there's little incentive for carriers to compete on price. Additionally, the needs of small businesses can be very diverse and very specific, meaning traditional carriers would need to spend more time and money to develop products that cater to these needs. Finally, the risks associated with insuring small businesses can be high, especially in certain industries or regions. This means that many traditional carriers may see small businesses as too much of a liability for the potential payouts they could receive.

Why E&S Lines are the Future of Small Business Insurance

So if traditional insurance carriers aren't going to pick up the slack for small business insurance, who will? That's where excess and surplus lines come in. By definition, this market is designed for when traditional insurance just isn't enough. E&S insurers can create policies tailored to the unique needs of small businesses, offering everything from cyber liability coverage to wind coverage for coastal properties. These policies may be more expensive than traditional ones but can provide the coverage businesses need to stay protected. Thanks to the flexibility of the E&S market, agents can find the coverage their clients need, no matter how niche or specialized.

What Agents need to Know about E&S Markets

But with so many E&S insurers out there, it can be hard to know where to begin. Agents need to do their due diligence when it comes to finding the right provider for their clients. Many E&S insurers specialize in specific industries, so agents should look for providers who have experience in the industry their clients operate in. They should also make sure the provider is financially stable and has a good reputation for paying claims. Additionally, agents need to be aware of the regulatory differences between E&S and traditional carriers, such as licensing requirements and tax implications. By doing their homework, agents can find the right E&S insurer for their clients and ensure they're getting the coverage they need.

The shift to excess and surplus lines for small business insurance may feel like a big change for insurance agents who are used to working with traditional carriers. But by understanding why this shift is happening and how it benefits their clients, agents can take advantage of the growing opportunities in this market. By finding the right E&S insurer, agents can ensure their small business clients are protected and can rest easy knowing they have coverage tailored to their specific needs. So stay informed, do your research, and prepare to capitalize on the growing demand for excess and surplus lines insurance coverage for small businesses. And when you're ready to do so, Pathpoint is here to help you get quotes and policies issued fast!