By Ken Kukral
As my mind wandered this weekend while driving for a couple hours, I thought how the insurance business is different than many other businesses. In other businesses such as retail it is just good sales practice to offer a client options, enhancements, add-ons and accessories. In fact the better you do that in retail the more profitable you will be. So when I go in to buy an I Pad 2 and they ask do I want the one with 3G, do I need a case, do I need a protective cover, do I need a memory card, etc. they are just looking to “round out the sales”. Even though I might have gone in to ONLY buy the I Pad 2, I ended up with a bunch of other stuff. If the sales person did their job well, the “buyer’s remorse” will be low and I will feel like I was taken care of and now have the “complete package”. In other words I am a satisfied customer and they hope I will return for future purchases.
Well in Insurance it is a little different. When I ask the client if they want additional options/coverage they think I am “just trying to sell them stuff”. They think if I didn’t have the coverage you are offering before, and I didn’t have a loss, why do I need it now? The term “insurance poor” comes to mind. The client feels they have a file full of policies they will most likely never have a claim on and they paid all this money. “Buyers remorse” is a bit higher since we are selling an intangible. Maybe, just maybe we should invite them over to clients house who just sustainined a large back up of sewer and drain loss and show them how you are going to put them back the way they were before the loss. Have them come over in the middle of the night to a client whose house just burned down so you can see how the carrier is quickly issuing them a check so they can get settled somewhere else while their house is being put back together. While this is not practical, we could do a better job of telling “our story”. Telling our clients of how we have “come through” when a loss happened and show them their “file full of insurance policies” is really worth something and they are actually lucky if they don’t suffer a loss and have to go through all the upheaval. I am sure there are ways we could use social media to accomplish this.
Not only do we have to deal with the belief that our clients think we are just trying to sell them more coverage, we have to deal with the problem if we DIDN’T offer them the coverage and they suffered a loss that they found out they were “self insured” for. There is nothing worse than when you suffer a loss and find out you “aren’t covered”. How do we combat this predicament with our clients? Well, first of all we need to take a “consultative” approach to selling with our clients. We need to educate them in order to make them better clients. We need to inform them of risks that they have and let them know there are risk transfer options. If those risk transfer options don’t meet the clients pricing expectations, they can continue to “self insure” and take this risk. The other thing we can do is have “checklists” for certain types of accounts so that we are covering many of the exposures and not leaving the client uninformed of what their risks are. We can give them pricing for those coverage options so they can make informed decisions.
Complicating this whole process, are new and emerging risks. Things change and we need to stay up with the times. In the Midwest we are not very prone to earthquakes, so when the earthquake happened in Washington DC we stood up and took notice. Should we be offering all of our client earthquake coverage? The answer is most likely yes. What better than to be the one agent who has properly covered his/her clients when an unforeseen earthquake happens in the Midwest and causes significant damage? Many times our clients see the risk of loss as low and the price as high compared to that risk. Our job it to increase the awareness of the loss possibility, so that the client’s pricing expectation is more inline with reality.
What else should we be offering? How should we be documenting our files that we offered the coverage? Should we be getting the insured to sign off on every coverage they reject? How do we make it look like we are not just trying to CYA? Personally I feel an overall risk assessment needs to be done on some sort of schedule. Maybe every three years, plus or minus a year. Or, after disaster happens. Many areas that never flooded before, flooded this year. In my city we hit our record annual rainfall since records were kept and it is only October! You do need to develop a system and stick to it. Your E&O depends on it.
What are some of the coverage options I should realistically be offering to my clients? With a proliferation of online rating or simplified rating it has become much more cost effective to provide coverage options without a lot of work on your part. A short list would include:
1. Liquor liability – Any risk that sells or serves alcohol need to consider carrying this coverage. I know personally of an E&O loss where the agent’s E&O carrier paid over $650,000 because they could not show that they offered liquor liability to his tavern client.
2. EPLI – I heard a statistic that only 18% of commercial clients carry employment practices liability. Really? This is one of their largest exposures, yet they continue to self insure. The cost per employee is so low it is hard to believe that they don’t seriously consider carrying the coverage. It is easy to rack up a $50,000 to $100,000 legal bill, even when you did everything right as an employer. What if they actually screwed up?
3. Cyber Liability – Both first and third party. This is such an emerging area of risk that many clients are not informed of what their risks are and the cost effective way to transfer the risk. In fact many clients do not even have a workable IT disaster plan and figure they will just “deal with it” whena loss happens, IF it happens. I think many clients will be enlightened by the risk analysis and will be amazed at the scope of the coverage being offered.
4. Crime Coverage – As I mentioned in a prior blog post this is one of the most undersold coverages out there. They may not realize that this is an area that a significant loss can put them out of business.
5. International package policy – With more and more businesses doing business internationally and traveling internationally this risk has increased exponentially. For as little as $2,500 many clients can get a policy that covers them for general liability, products liability, property, hired & non-owned auto, international workmen’s compensation, AD&D, emergency medical coverage and a number of other risks.
6. Privacy liability – Another area where clients do not understand the scope of the risk, regulations and compliance. Only after a loss will they understand. Getting your clients up to speed in this area and providing risk transfer options is very important. Insurance coverage is extremely affordable and many clients will be pleasantly surprised.
7. Special events – Does your client put on special events that are not covered by their present insurance? Here is another area where they have no clue until after an uncovered loss. Coverage options are affordable and clients will appreciate that you discovered an exposed area of their risk profile.
8. Hired & non-owned auto – Many clients think that if they do not have any corporate autos then they do not have an auto liability exposure. Wrong!
9. Environmental – I heard a statistic that only 6% of risks with an environmental exposure carried coverage. Losses in this are can be significant and be complicated. A number of governmental and regulatory agencies will be involved and you could spend years dealing with the aftermath. I know of one loss where a mercury filled blood pressure monitor broke and the subsequent loss was over $400,000!
10. Mechanical breakdown – Many agents do not realize that this can be written monoline and they do not have to rely on their carrier offering coverage to be able to get it. With so many electronics in nearly ever business it is becoming an ever important coverage to consider.
11. Assault & Battery – While a number of carriers exclude this exposure, many will offer sub-limits, full limits or go silent on this coverage. My belief is that you need to offer alternate quotes including this coverage so that the insured is taking the risk knowingly and not just thinking that all carriers exclude it.
Look at how you are going to approach your clients so that when you try to work with them to build a “well rounded” insurance program, you do not come off as just trying to sell them more coverage. Your E&O and job satisfaction depend on it. Besides, your profitability depends on it too!