Insurance Agents and Brokers Have Duties to Prevent Policy Gaps and Gaffs
I love insurance agents. In my view, along with a good banker, lawyer, accountant and doctor, the next trusted person for business and personal matters that one should have a long term relationship with is an insurance agent. Unfortunately, many insurance company cost cutters, probably the types I mentioned yesterday in Don't Forget Visa at the Winter Olympics and Expect it, Rather Than Cash, From Your Insurer, want to save on agent costs and now suggest customers shop and learn about insurance purely online. This method of insurance selection is akin to representing yourself in court or self diagnosis of major medical symptoms with just as devastating financial and personal consequences. Learn about insurance on the internet, but buy through a knowledgeable and reputable insurance agent is my strong advice.
An article by Christopher Boggs, "Insurance Checklists and Client Letters are Important," proves my point and shows how insurance agents should go about their business making certain that the insurance their customers purchase does not have gaps or gaffs in coverage. Boggs noted:
Errors and omissions carriers and consultants highly recommend the use of insurance checklists to aid agents in smoking out the insured's true exposures and as proof that certain information was sought. Some agencies take the use of checklists so seriously that they do not pay the producer, or lower his pay, if the requisite checklists are not in the file - signed by the client.
Without using checklists, insurance agents and brokers will make mistakes obtaining the right and full coverage needed. Unlike other products, most customers looking for insurance have only a vague idea about how the insurance product works, how endorsements and other insurance are needed to obtain "full coverage," and how it should be purchased in a package that is economical. I cannot tell you how many people, even MBA educated business owners, have looked me square in the face and told me that they saw ads about flood insurance not being covered and then called their agent to ask if their property insurance covered the peril of a hurricane. Like ships passing in the night, there was discussion, but not sharing of knowledge. Insurance policies are complicated and customers should learn about the product from their agents and not buy on price. As often is the case, you get what you pay for. Less expensive insurance often means it is cheaper, not better nor just as good.
For an example of how complicated the considerations of insurance can be, here is the checklist that Boggs recommends using just on the aspect of property valuation:
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What are the chances an insurance customer would appreciate how important each of these questions and points are to property insurance? I suggest close to zero. Yet, insurance agents are trained to deal with these questions and issues as part of their job. My advice is to work closely with an insurance agent and let them help you raise all these issues so the insurance is right, not just cheap.
The form you are referring to is commonly used for a small business and not a residential risk. There are others that are more suitable to a residential risk. Also be wary of the term agent it does not necessarily connote proper training.
All too often we as adjusters see the lack of training when we have to inform the insured that there is a lack of appropriate coverage. A lot of agents are great salespeople but not great insurance savvy partners.
Get to know your provider and inquire about their credentials before entrusting a portion of your financial viability to them.
Great article Chip! There's a huge gap between those who peddle insurance and those who advise. At times it is very challenging to spell out all of the issues to a client who simply wants to comply with a mortgage requirement at closing, or a landlord who has obligated them to purchase a minimal premises liability - but it is always our responsibility to do everything we can to raise and discuss those issues.
Keep up the good work.
Andrew Giambarba
Gaps can be picked in any Checklist and the ones I detect in this otherwise excellent version are;
!) Allowance for demolition and removal of debris
2) Allowance for inflation both during the policy period and the rebuilding period which may exceed the normal insurance year.
3) Would the insured rebuild at all?
4) Have structures or assets,other than buildings,been valued?
John Sloan
Wellington
New Zealand
John,
All the way from New Zealand! What a beautiful country and people. Go All Blacks!!
And, thanks for the suggestions. I will write an email to Chris Boggs with your thoughts.
New Zealand? Isn't it great to be surrounded by beautiful people w/beautiful minds and new thoughts?
SHIRLEY HEFLIN