Hi everyone. Welcome back to part two of our non-rate action series. In part one, we discuss possible non-rate actions. In this part, we’re going to discuss the timing and implementation of these non-rate actions. Dan, can you talk a little bit about that and when you want to implement these?
Absolutely, Mike. I think it’s important to review your total book of business as you’re doing a segmentation analysis. You might identify certain pockets of growth or profitability that you want to address within your rate review, and that might be the ultimate decision that you make and that might be the best call for that. But in the meantime, you should be thinking about your non-rate levers that you have at your disposal and tweaking some of those so that you can avoid some adverse selection.
So, a rate change when you think about the time to make a decision, to file, to get that approved, to get that implemented, to get that into your systems, that could take 4 to 6 months easily. With a non-rate action, you can get it in market quicker and you could avoid some of the near-term adverse selection. And then once that rate change goes into effect, you can take a step back and adjust the non-rate lever that you’ve pulled in order to reflect the new rate level.
I think it’s important to think about these as ongoing actions. Like you mentioned, you have a rate change that’s going into place, but you want to implement this non-rate action first. Once that rate goes into place, you may adjust the non-rate lever that you pulled. These are ongoing actions that you’re going to need to continue to adjust over time. The one way to do that is you want to make sure you have a good monitoring process in place and understanding what the changes you make can have done to your book of business and really taking a step back and making sure that the changes that have been made are what your company wants to move towards.
And also remember that it’s a dynamic marketplace that we’re in. Competitors are also making changes to their rates, to their non-rates as well. You need to be able to adjust as that marketplace is changing, too.
These non-rate levers can be the difference between a profitable and an unprofitable year for these carriers. Exactly.