Call it a midlife crisis.

You’ve glanced at your book of business in the mirror and it isn’t pretty. There’s a little more flab around the stomach than you’ve noticed before, a few more wrinkles around the eyes, and it just doesn’t spring out of bed in the morning like it used to. Face it – your book of business is getting old!

According to Lexis Nexis, the median home age in the U.S. is 35 years. Another study by the University of Florida indicated that “40 years is regarded as the age when serious repairs or remodeling work begins to occur” to single family dwellings. As design styles and consumer preferences change, cabinets are torn out, flooring is replaced, interior walls are knocked out or modified, electrical and plumbing are rewired and replumbed, and windows are replaced.

The good news is you don’t have to watch as your book cruises toward retirement. You can whip it into shape and keep it energized with a few exercises:

  1. Updates – Check with your customers and find out if they’ve had any recent updates or renovations. We’ve all seen homes that look like set pieces from Mad Men – still stuck in the 1960s (no, Mom, it’s not considered “Mid-Century Modern” when the furniture actually existed mid-century. That’s just… “Outdated”). Has a pool or garage been added and coverage limits need to be increased? When was the last time the roof was replaced – are they now eligible for wind mitigation credits? How about the HVAC and the plumbing?
  2. New Construction – Like a fresh coat of paint, writing new construction can breathe life into your portfolio. As markets improve, partner with real estate agents, builders, neighborhood associations, chambers of commerce, and building and redevelopment boards to target new construction. Tower Hill is offering an agency incentive program through October 31st, 2014 for HO3 and DP3 homes with a year built of 2002 or newer (contact your Marketing representative for more details).
  3. Inspect It – When was the last time a 4-point inspection was ordered for your customer’s home? Like a checkup at the doctor, an inspection may reveal conditions that could cause a loss or need immediate attention. Companies like Inspection Depot even offer you referral credits that you can accumulate to give free inspections to your clients.
  4. Change Your Marketing Strategy – Have you relied primarily on one channel, like internet leads or referrals? It might be time to change how you reach your customers. As the saying goes, insanity is doing the same thing over and over again, but expecting different results.
  5. Balance the Book – Look at the age of home distribution in your portfolio (your quarterly report card will give you a breakdown of policies by the year built). Is it weighted toward one decade or segment of homes? Do you write primarily $200,000 homes in a certain county, city, and zip code? Like any sound investment strategy, spreading the risk means a more balanced portfolio. If your book is heavy in homes built before 1980, look for neighborhoods to target that are newer. Also consider how you place business with your carriers. Are you saving those older homes for one specific carrier, or are you spreading the risk to multiple carriers?
  6. Unlock the Loss Ratio – Where do you derive your Earned Premium? What segments of homes have a higher amount of Incurred Losses than others? Determining profitable and unprofitable areas of your book can help you create an action plan to improve it.

Older homes in good condition and maintained by the homeowner are an important part of any agency’s book. Ask pre-underwriting questions about updates to the home to help separate the poorly maintained homes from those that have been renovated and updated.

It takes active portfolio management to keep your book from “aging” out of profitable performance. With these simple tips, you can revitalize your book and keep it performing well.

Brian Hunt, AIC, CPCU

About Brian Hunt, AIC, CPCU

Commercial Underwriter II
Tower Hill Insurance Group

Brian started his insurance career with State Farm in St. Paul, MN, in 1998. In addition to handling property and liability claims, he served as part of the National Catastrophe Team, following tornadoes, hurricanes, and hailstorms across the country. He made several friends named Charley, Frances, Jeanne, Ivan, Wilma, and Katrina. He moved to Florida in 2009 to manage a catastrophe office in Jacksonville, and because of a girl (now wife) his path led him to Gainesville and Tower Hill Insurance. In his free time, Brian is an Ironman triathlete and also enjoys writing about local and national history.