Property Insurance Coverage Law Blog : Florida Insurance Lawyer & Attorney : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables, Gulfport

The Chartered Property Casualty Underwriter designation is not just for underwriters. Adjusters, Agents and Risk Managers also benefit from the CPCU designation.

The American Institute for Chartered Property Casualty Underwriters/Insurance Institute of America, offers the CPCU program.

As a CPCU candidate, you will learn about the financial, legal, operational, and technical aspects of risk management and insurance. You can even choose either a personal or commercial insurance concentration, depending on your professional background and needs.

In becoming a CPCU, you will:

• Gain in-depth, broad-based knowledge in risk management and insurance.

• Learn practical skills that you can put to work immediately.

• Learn how to make better decisions on the job.

• Distinguish yourself from your peers while demonstrating your commitment to professionalism.

• Earn the respect accorded those who hold the designation.

The CPCU curriculum balances practical skills with insurance and risk management theory. By learning the why and not simply the what, you will have a better understanding of the p-c business and will be able to make better business decisions.

Earning the designation involves intensive testing. Applicants must pass eight exams. In addition to the four CPCU foundation exams and one elective exam, participants must also pass the Ethics and the CPCU Code of Professional Conduct exam, and three exams in either the Commercial Lines or Personal Lines.

The CPCU designation is easily be explained to potential clients as the highest insurance designation in the industry. The courses focus on giving participants an edge when it comes to education, experience and ethics.

If you obtain the technical designation of CPCU, you must subscribe to the CPCU Code of Ethics. While the code has been in place since 1976, the ethical course was recently added to the program to ensure that participants recognize the need for all insurance transactions to be handled with the highest level of ethics in order to preserve the public’s trust of insurance.

In addition to the benefits, CPCU professionals earn more money. According to a 2008 survey of CPCU Society members:

• 91% saw an increase in job opportunities, while almost all say earning the designation fast tracked their career;
• 75% received a salary increase, and nearly a quarter of those attributed 10% or more of the increase to earning the designation; and
• 97% gained professional recognition.

The Institutes declare that the CPCU designation allows recipients to handle complex commercial property and personal loss exposures with advanced technical knowledge and increase effectiveness and positively affect overall operations with an increased understanding of how different functional areas interact with and relate to each other.

The CPCU program is a very intense. It takes most candidates three years to complete the program and, after all of the course work is finished, the participant’s character has to be approved. An in-depth evaluation into the background of the participant is conducted before the designation is granted. The designation can also help extinguish potentially negative attitudes held by other adjusters when they meet you. When the SIU, CAT or desk adjuster sees your qualifications, they know you have the education, experience, and the ethical standards of the elite.

Of course, you don’t have to have the CPCU designation to be a competent public adjuster, but holding this title can easily help you explain to a potential client what sets you apart from the others who have offered to help. The Institutes offer 100 scholarships for the CPCU designation program each year.

We welcome your comments about the how the CPCU designation has positively impacted your claims. Tell us your story below.

Hartwig said that since the middle of 2008, employment in the P&C insurance industry has hit a record low as a result of the economic downturn. As a whole, he said that employment in the P&C industry was down almost five percent since the recession began, nearly matching the 6.1 percent decrease in employment in the overall U.S. economy.

For claim professionals, however, the news was grimmer, as statistics show the adjusting profession is taking the biggest hit.

"We have seen a very, very sharp drop in the claim adjusting area, the sharpest drop of all P&C positions in percent terms, around 14 percent since the recession began," said Hartwig. "I do not know precisely what the driver of this is at this point, but the number of people employed in the claim adjuster position today is roughly where it was in 1995."

So, what can you do if you are in the claims industry and want to stay there? I am asked career advice from a number of adjusters, regardless if they are company, independent, catastrophe or public insurance adjusters. Except for experience and reputation, the single most important and easiest thing any claims adjuster can do is prove dedication and passion to this noble business through education. The claims insurance industry "calling card" that everybody recognizes is the CPCU designation. If you enjoy what you do as an adjuster, I strongly suggest you watch this video and then sign up for the courses needed to become a CPCU: 

Chris Boggs has a number of columns at MyNewMarkets.com that every insurance agent should read. Anybody reading some of Boggs’ very technical explanations of coverage can better appreciate how much education and dedication is required of insurance agents and brokers. Anybody very good in insurance at the claims or solicitation level knows you have to be a little bit of a nitpicker or nerd to enjoy the nuances of language within the various insurance policies. A little research about Boggs shows he is as well:

“Boggs brings nearly 18 years of experience in insurance and risk management, a background that includes teaching pre-licensing and insurance continuing education courses and writing on coverage and insurance-related issues.

He is a veteran insurance professional, having worked as an account executive for several property/casualty agencies and as a senior risk analyst for one of the largest risk consulting firms in the Southeast.

He is a former associate director of education for the Independent Insurance Agents of North Carolina, Inc. and a former loss control and claims specialist for the North Carolina Department of Insurance.

International Risk Management Institute's (IRMI's) The Risk Report, The John Liner Review, RIMS' Risk Management magazine, and the American Public Power Association magazine have featured several of his articles.

In addition to teaching others and writing about insurance and risk management, Boggs has himself earned a host of insurance designations, including CPCU, ARM, ALCM, LPCS, AAI and APA.
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Boggs is thrilled with his new assignment. "I'm a little odd in that I absolutely love the technical issues in insurance and risk management. I enjoy delving into the details of policies, finding coverage gaps, comparing terms and conditions," says Boggs. "I'm truly excited about being able to do this while helping fellow agents and brokers solve their problems."

Few individuals have the depth of insurance education reflected in Boggs’ certifications. It is obvious he is well and wide versed in various aspects of insurance and should be thought of as a leading educator in the insurance field. His leadership of thought is demonstrated in his bold pronouncements of what agents and brokers should be doing during the solicitation and underwriting of policies. In a field with an extremely important ethical and knowledge based duties, it is important to have somebody discussing the issues agents and brokers confront, and doing so with clearly spelled out guidelines which should be followed to benefit and properly protect the policyholder.

His current article, Three Commercial Property Endorsements Every Client Should Have, notes that not all property is covered under standard forms but that endorsements are available to help partially correct this policy gap of coverage:

“This post is the first of a three-part series expounding on the theme of using coverage gaps to sell; but rather than specific coverage gaps, these three posts focus on endorsements to the commercial property, commercial auto and commercial general liability policies every insured should consider or avoid (in the case of the CGL article).

Three key commercial property endorsements are discussed in this first installment, the: 1) Additional Covered Property endorsement (CP 14 10 or state-specific form); 2) Additional Building Property endorsement (CP 14 15); and 3) Joint or Disputed Loss Agreement (CP 12 70). Obviously these are not the only commercial property endorsements valuable to a specific insured, but these are three every insured should consider.”

Notice how Boggs clearly indicates what agents should do. He notes that an agent or broker should make the coverage gap known to the policyholder. He then explains in the article what endorsements the policyholder should consider purchasing and why:

“The commercial property policy contains a list of "property not covered" within the form itself. Among the list of excluded property exists several property types or real and personal property the insured (and possibly even the agent) may assume is covered by the policy but is not. Examples include building foundations, underground pipes, flues or drains and fencing (this is not a complete list of excluded property, just a sample).

Some excluded property can be added back to the list of "covered property" via the Additional Covered Property endorsement. Two broad versions of the form are available from ISO - based on the state in question:

1. The CP 14 10. This is essentially a blank form allowing the insured to specifically list the property they wish to remove from the "property not covered" list and include as covered property; and
2. ISO State-specific endorsements. Two examples are N.C. (CP 14 11) and Va. (CP 14 12). In forms such as these, several types of real and personal property are taken from the list of "property not covered" within the unendorsed coverage form and listed on the endorsement. The insured chooses which property it desires to include as "covered property" and indicates that choice by placing an "X" in the box next to that property class.

Any removal of property from the "property not covered" list and its endorsed inclusion on the "covered property" list is, of course, subject to underwriter approval - regardless of which version of the form is used.”

Everybody can learn from people who have a specialized knowledge in a field. Chris Boggs can teach all of us a lot about property insurance coverage from the perspective of agents and brokers selling these products.

Insurance agents and brokers should be especially cautious with insurance to value calculations. They should explain the importance of insuring a structure to full replacement cost and explain the consequences for the failure to do so. From what most policyholders tell me, as well as my own experience, the discussion of insuring to value often goes something like this:

Agent: “Joe, we have to place on the application how much insurance you need.”

Joe Policyholder: “I just hope I can afford what you are about to quote me.”

Agent: “Well, how much is your building value if you had to replace it?”

JP: “I don’t know. How much did I have it insured for last year?”

Agent: “A little more than a million, $1.23 million. Have you made any improvements since last year?”

JP: “We added some computer wires, made a new conference room, and upgraded the air conditioning for our IT Department. I think all that would be around $200,000. Maybe we should add that amount to what we had from the year before? Didn’t the carrier send out a guy to look at the building? What did he say?”

Agent: “I cannot seem to locate it. Do you feel comfortable if I insured it for $1.45 million as the replacement cost? If you feel that is the right amount and can replace the property for that, I can get some quotes with cheaper premiums if you agree that you have insured to 90 percent or 100 percent of the full replacement cost value. You have to be sure about the amount of insurance or there ca be a penalty if we get this discount for you.”

JP: “Great. Gosh, I didn’t know we could save money just by insuring to the full replacement cost. Fantastic! Thanks.”

Now, most agents reading this will say they go into far greater detail. Many do, and I have seen a number of in depth discussions and proposals fully explaining everything. But, I have also been in clients’ offices while the insuring value is discussed. Often, my hypothetical is not far off from what I have heard. Policyholders want great coverage at great prices. Many agents simply want sales. Sometimes, both choose to ignore the small details of exactly how the product works and the grave importance of insuring properly because price is higher and agent shopping may ensue.

Christopher Boggs, a CPCU, wrote an excellent article last week, Applying Coinsurance to Homeowners' and CPP's, that is simply a must read for agents and brokers because of his warnings regarding possible claims of errors and omissions claims. Policyholders and adjusters can also learn a lot from it as well. The possible claims against agents for leaving policyholders with a 100 percent coinsurance policy could not be clearer:

“The commercial property policy allows the insured the option to use 80%, 90% or 100% coinsurance. As the coinsurance percentage increases, the property rate (or loss cost) decreases. But should 100 percent coinsurance be used?

From an errors and omissions perspective, probably not; using 100 percent coinsurance leaves no room for an incorrect calculation which requires the insured to always have 100 percent of the value in force. Even attaching the inflation guard endorsement may not give the insured adequate coverage at the time of the loss.

Commercial property policy insureds also have the opportunity to write all property coverage under a blanket limit of protection. Blanket limit policies are the preferred method when the insured is trying to avoid undervaluing a particular class of property or a particular property location (especially if there are several properties or contents moving among several buildings or locations). However, use of a blanket limit requires the minimum coinsurance percentage be increased to 90 percent.
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But, as stated above, even though the property is valued at 100 percent of its TIV, do not increase the commercial client's coinsurance to 100 percent (even though there is a slight premium break). Use 90 percent to avoid most miscalculation problems and allow some room for an unexpected increase in replacement cost.”

This is excellent advice. It is very difficult to accurately estimate the replacement cost of a significant structure. Even bids for construction can wildly vary. How much should anybody really bet on any one estimate getting the replacement cost just right?

Another useful tip was to use “agreed values:”

“One approach CPP insureds can employ to avoid the application of coinsurance is "agreed value." As the name suggests, the agreed value is the value the insured and the underwriter agree the property is worth. Attaching the agreed value endorsement suspends the coinsurance provision for one year. At the end of the year, a new schedule must be submitted and a new agreement reached.”

The last thing a policyholder wants is to have a loss. Having a loss where the claim is not paid in full will undoubtedly cause issues about why enough insurance was not obtained. My view is “safe is better than sorry.” I suggest when it comes to coinsurance, it is the best policy.