A Wholesale Broker’s View on Navigating California’s Insurance Challenges
California’s insurance market is undergoing significant changes, and the industry is taking note. Neera Sharma, president of wholesale brokerage Coastal Brokers Insurance Services, offers a critical perspective on the challenges and future prospects for brokers in this volatile environment. The main challenges are related to growing financial losses and carriers pulling out of the market. With the FAIR Plan becoming a dominant player by default, brokers are forced to find innovative solutions to stay relevant.
Sharma identifies problems and discusses what brokers need to do in the current state.
The FAIR Plan’s Growing Dominance
Sharma bluntly states the reality: “It is a very, very challenging time for California.” She highlights that many insurance companies are scaling back their offerings, leading to considerable difficulties for brokers. At the root of this disruption is the state’s FAIR Plan, originally designed as a last-resort option. It is now capturing substantial market share and displacing private insurers. Sharma explains that her firm is frequently losing property coverage business to the FAIR Plan, which can be frustrating. “We’re not losing to another private insurer,” she says. “We’re losing the business to the FAIR Plan.”
Strategies for Broker Survival
The retreat of insurers is fueled by mounting financial losses from wildfires, landslides, and earthquakes. For Sharma, the focus has switched to constant business innovation. She emphasizes the need for brokers to seek and create opportunities, even as traditional options dwindle. “We’re trying to find ways to write coverage,” she explains, suggesting the creation of new bundled products and services. This creative approach necessitates close collaboration with carriers willing to try new solutions. “We’re pushing the markets to think differently, because the conventional models aren’t holding,” she added.
Identifying Market Gaps and New Opportunities
Looking ahead to 2025, Sharma sees both challenges and opportunities. She plans to focus on developing “wrap products” that combine the leftover components of coverage to create solutions for clients. It’s an intentional strategic move, as she aims to identify gaps where business needs are not being met. She is also optimistic about broader economic shifts. Sharma is hopeful for the return of domestic manufacturing, which she believes offers new opportunities for her firm. “I’m hopeful that some manufacturing will return from Mexico,” she says, “That gives me hope to write more products. We’ll be focusing more on new GL options – and, as always, we’ll have to be innovative.”
The Importance of Adaptability and Innovation
Sharma remains emphatic that adaptability is a broker’s best asset. “Yeah, yeah. We’ll have to be innovative in order to survive. That’s what it is,” she says. The challenge for brokers is not just about finding coverage, but also keeping up with the changes within the industry. She is also seeing many veteran brokers approaching retirement. This situation, according to Sharma, “is an opportunity to embrace technology, to learn the products, and to move faster.”
Keys to Long-Term Success
Sharma believes the combination of speed, solid product knowledge, and accurate pricing will keep brokers ahead. Staying informed about developments is essential. But above all, she emphasizes the critical importance of the human element. “If you’re innovative, if you’re picking up the phone, talking to clients, providing the knowledge they need, and educating newcomers, you’ll win.” Her clear message is that complacency has no place in California’s insurance market, and it’s the brokers and MGAs that are willing to change that will survive.
