There may be a few products that are less transparent and more shrouded in mystery than business insurance, but not many. As a coverage attorney, I am usually asked to look at a coverage issue after the fact in the context of whether a claim is covered. Occasionally, I am asked to assist with evaluating coverage while it is being purchased. Based on these experiences, I can only say: “Buyer beware.”
When you go to Best Buy to buy a new TV, you can compare the various models for size, features, and picture quality. When you make a decision and pay your money, you can be quite confident that the TV you take home will perform in the same manner as the demonstration unit in the store.
Buying insurance is much different. First, you buy insurance through an agent. Most businesses, particularly small businesses, seem to do little research or evaluation of the agent. Usually, the reference seems to be from a brother-in-law or similar source who knows “someone” in the insurance business. Just because someone is licensed to sell insurance does not mean they have the necessary experience, competence and professionalism to do a good job.
In fact, many agents do not seem to have a clue about what they are doing. They may spend a little time with a business owner to develop some level of understanding, but seldom seem to take a deep dive into the risks faced by the business. Often, they will sell based on price rather than the breadth of coverage or the quality of the insurer. I have seen a couple of very unfortunate recent instances where agents have placed coverage with large holes in coverage, and without informing the insured.
Many growing businesses may also stay with an agent long after their business has outgrown the sophistication of the agent to analyze and deal with its risks. There is a corresponding tendency simply to renew an existing program year after year, without thorough consideration of whether it meets current needs.
Even with a good agent, the process is often shrouded in mystery. Policies are typically not delivered until months after they are purchased. When they are delivered, the policies will contain exclusions and endorsements. As I have noted previously in this blog, some commercial general liability policies are so heavily endorsed with exclusions that it is difficult to know what they cover.
Because of the mysterious way in which policies are purchased and delivered, it brings to mind Forrest Gump’s mother’s famous comment that “life is like a box of chocolates. You never know what you are going to get.” Unfortunately, many business policyholders do not know what they purchased until they have a major claim.
It does not have to be that way. Here are a few common sense suggestions that may help:
1. Research the background of your agent. What is the agent’s educational background? Does the agent’s educational background include training in risk management and insurance? Although many may not realize it, universities offer degrees in risk management and insurance. Does the agent service other businesses of a similar size and risk profile (or larger) as your company?
2. Is the agent willing to spend time truly learning about your company and its risks? Does it offer risk management services? Basically, what you are trying to determine is whether you are dealing with an “order taker” or a professional who is truly interested in helping protect your company.
3. Before buying, insist that the agent walk you through the basic policy terms, including all endorsements that limit coverage. The quote from the carrier should be based on a particular policy form and schedule of endorsements, which should be available to the agent in specimen form. Although an agent cannot predict how an insurer will handle specific claims (many insurers will try to avoid coverage obligations even when the basis for doing so is weak), this process should help identify potential holes in the program before you buy. If so, the agent may be able to offer specialty products to cover the risk. Note: An agent that takes the time to do this may also be able to offer assistance in dealing with a carrier if the carrier takes an aggressive or unwarranted stance regarding coverage in the event of a claim.
4. In some instances, you may want to involve a policyholder’s coverage attorney in the review process, particularly if your company has an unusual business, faces large risks, or if it has had insurers deny or try to deny claims in the past.
When you go to Best Buy to buy a new TV, you can compare the various models for size, features, and picture quality. When you make a decision and pay your money, you can be quite confident that the TV you take home will perform in the same manner as the demonstration unit in the store.
Buying insurance is much different. First, you buy insurance through an agent. Most businesses, particularly small businesses, seem to do little research or evaluation of the agent. Usually, the reference seems to be from a brother-in-law or similar source who knows “someone” in the insurance business. Just because someone is licensed to sell insurance does not mean they have the necessary experience, competence and professionalism to do a good job.
In fact, many agents do not seem to have a clue about what they are doing. They may spend a little time with a business owner to develop some level of understanding, but seldom seem to take a deep dive into the risks faced by the business. Often, they will sell based on price rather than the breadth of coverage or the quality of the insurer. I have seen a couple of very unfortunate recent instances where agents have placed coverage with large holes in coverage, and without informing the insured.
Many growing businesses may also stay with an agent long after their business has outgrown the sophistication of the agent to analyze and deal with its risks. There is a corresponding tendency simply to renew an existing program year after year, without thorough consideration of whether it meets current needs.
Even with a good agent, the process is often shrouded in mystery. Policies are typically not delivered until months after they are purchased. When they are delivered, the policies will contain exclusions and endorsements. As I have noted previously in this blog, some commercial general liability policies are so heavily endorsed with exclusions that it is difficult to know what they cover.
Because of the mysterious way in which policies are purchased and delivered, it brings to mind Forrest Gump’s mother’s famous comment that “life is like a box of chocolates. You never know what you are going to get.” Unfortunately, many business policyholders do not know what they purchased until they have a major claim.
It does not have to be that way. Here are a few common sense suggestions that may help:
1. Research the background of your agent. What is the agent’s educational background? Does the agent’s educational background include training in risk management and insurance? Although many may not realize it, universities offer degrees in risk management and insurance. Does the agent service other businesses of a similar size and risk profile (or larger) as your company?
2. Is the agent willing to spend time truly learning about your company and its risks? Does it offer risk management services? Basically, what you are trying to determine is whether you are dealing with an “order taker” or a professional who is truly interested in helping protect your company.
3. Before buying, insist that the agent walk you through the basic policy terms, including all endorsements that limit coverage. The quote from the carrier should be based on a particular policy form and schedule of endorsements, which should be available to the agent in specimen form. Although an agent cannot predict how an insurer will handle specific claims (many insurers will try to avoid coverage obligations even when the basis for doing so is weak), this process should help identify potential holes in the program before you buy. If so, the agent may be able to offer specialty products to cover the risk. Note: An agent that takes the time to do this may also be able to offer assistance in dealing with a carrier if the carrier takes an aggressive or unwarranted stance regarding coverage in the event of a claim.
4. In some instances, you may want to involve a policyholder’s coverage attorney in the review process, particularly if your company has an unusual business, faces large risks, or if it has had insurers deny or try to deny claims in the past.
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