Continue reading…

'Stupid' policy decisions

Let's apply a process to insurance consumers. How do we know whether an insured is making a “stupid” choice (in our opinion) due to cluelessness or deliberate decision? Answer: We don't, unless we have first taken two required steps:

1. Simplify, clarify or modify the coverage forms and explanations so that an insured has a reasonable grasp of what a given coverage or policy actually does; and
2. Provide a realistic appraisal of the potential gains and losses of their choice.

For those who question whether there is a future for agents in the insurance purchase process, who is better positioned to be the insured's trusted resource in obtaining the necessary information? In addition to rendering sometimes complex policy language into understandable applications to a given insured's real exposures, agents are also perfectly positioned to use current endorsements or alternate coverage sources to modify, minimize or remove those same coverage complexities.

Potential for agents to bring value

Numerous examples of this potential for agents to bring value to the process are at the heart of every past article of mine. There are also myriad other industry resources, including a working knowledge of the applicable forms and endorsements available from ISO, AAIS, NCCI and your carriers. Here is a sampling of possibilities in the ISO forms:

• Special Causes of Loss raising underwriting issues over coverage being too broad for location/risk — BP 10 09 removes the the background noise by taking the coverage back to good old specific named perils.
• Issues with payroll exclusions/limitations in the Business Income forms — CP 15 10 lets the insured match the payroll coverage to his own preferences.
• Potential grey areas creating coverage gaps via the CGL liquor liability exclusion — CG 21 51 lets the insured spell out exactly what activities and/or premises she wants covered.
• Insurance to value requirements in BOP may create potential penalties at claims time — BP 04 83 makes the penalties go away.
• Tired of trying to explain off-premises and/or dependent properties limitations in Business Income — CP 14 55, CP 15 08. CP 1509 and CP 1534 make them moot.
• Insured can't understand why the longtime live-in love of her life, who for personal reasons she has yet to marry, should be cut out of coverage under her HO policy — HO 04 58, or better yet, specifically add the love as a named insured (BONUS: Also avoids any unnecessary discussion that may be misinterpreted as a moral judgement on her personal decisions.)
• Flood not being covered in standard property forms — Write a dad gum flood policy! (And don't forget the HO 04 95 or equivalent).

Many of us understand that insureds are intelligent folks who likely better understand their personal tolerance of risk than we do. What better month than July to recommit our efforts to make them not incompetent, fearful buyers of products often forced upon them by others, but rather consciously capable consumers able to make reasonable decisions, even if we personally would prefer they choose differently? We cannot expect others to trust us if we refuse to trust them.

Chris Amrhein, AAI, is an insurance educator and speaker, and serves as the chief fun officer at insuranceisfun.com. Opinions expressed in this article are the author's own.