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Posts Tagged ‘Auto Insurance Coverage’

The Insurance Company “Bluffing Letter”

Have you had a client whose claim was denied but you felt really uncomfortable about the coverage determination?

I have been working on quite a few denied claims in the recent future.   It have become apparent to me  that Insurers are using a strategy to issue a “bluffing letter”.    It looks like a denial and will discourage all but the most resolute Insured or Agent.

The letter basically says, “We don’t this covered and gives a litany of reasons.”   We will not indemnify or defend this claim….!”         The Insured files it and basically goes away without questioning it.    Some of these claims should be covered.  I have gotten several paid recently and in some we have filed suit.   (Of course, there are also many legitimate denials.)

Agents…  Don’t let your Insureds be taken advantage of this way.  ALWAYS follow up and when you need to involve an insurance expert such as myself, call us!.    “My business is knowing your business”. Let us help you protect your Insureds!   We can likely keep you out of an E & O claim!

 

 

Have you recommended earthquake coverage to your insureds?

Have you recommended earthquake coverage to your clients?    Today we even felt a slight tremor right here on the dear old Portland Fish Pier!     Earthquakes happen, they happen on fault lines, and WE ARE ON A FAULT LINE!

We need to point out to our clients that they need to at least think about buying earthquake coverage.    When they are trying to hang you out to dry for NOT RECOMMENDING earthquake coverage, they are going to call me and ask me, as an expert witness, “Mr. Candage, do you consider it “state of the art insurance practice” to recommend earthquake insurance?”

Before today I would have had to say “yes, we are on a known fault line.”    After today I am patting myself on the back because I am correct!    Put earthquake on your checklists, on your renewal questionnaires, put earthquake on the big screen for everyone in your agency!  It is important for you NOT to deprive the client of the knowledge they could buy it FROM YOU!

Is Insurance a Commodity? (6)

This discussion of Commodities centers on recent attempts by insurers to circumvent agents and sell insurance products over the internet.    I am convinced that insurance is not a commodity as it is not a product that can be sold in an unmodified state and be used properly.   It would be like purchasing an unassembled, complicated piece of equipment and having no directions for assembly.  It appears to me that is the case with “unbundled” “risk bearing” or to put it another way, the thing Insurance companies sell is a “risk finance” mechanism.    Agents add value to this product by showing purchasers how to use it and by adding their own body of knowledge to the process!

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A “commodity”, then, is a necessary element in the chain of production of a product or service, that is useful to someeone in it’s static state.  A “Commodity” needs additional process or knowledge or processing before it becomes a useful consumer product.   A “Commodity” is a factor in the chain of production.   Thus risk bearing is, perhaps, a commodity.   “Insurance” is a completed user friendly product that is packaged in a way that it is useful and dependable to the consumer. 

To make insurance useful and dependable to the consumer, the consumer needs additional knowledge and services not only at the point of sale but at every transaction point in the chain of use.    It is difficult for an insurance company to provide those services as their function is to provide risk bearing service at a profit.   There is an inherent conflict between what the insured wants and what the company is willing to give. That conflict creates a situation where there are sufficient incentives NOT to do the right thing on behalf of the client.

It is the same problem that surfaces in a Managing General Agent (“MGA”) relationship.  The insurance company gives the underwriting authority to the MGA.   This creates sufficient incentive in the MGA to “bend” the rules.   If the MGA does not actually produce a policy from this insured, they don’t make any MONEY, let alone profit.  The MGA does not have to “pay the claims” and they are incented only to write business.   An insurer is incented to make a profit on underwriting.   The more they can diminish claims experience, the more money everyone makes.   The more the MGA writes, (good or bad business), the more the MGA makes, but if they do not make the sale they make nothing.  The incentives are in the wrong place for optimal performance.  

So “raw” risk bearing is a service for which there MUST  be the value of additional knowledge before it becomes a product.   When it is purchased without the advice of an agent at the time of sale or without the benefit of an independent advocate at the time of the claim, the value of insurance is diminished due to the consumers lack of risk management knowledge, coverage knowledge and pricing knowledge.   The fact that the consumer made an inferior purchase is likely obscured until the time of claim.    The value of the agent is not apparent until the claim occurs.  

So, buying insurance without an agent is like buying an old fire extinguisher at a yard sale and putting it in your kitchen in case there is a fire.   You won’t know if it works until you have a fire. 

I believe I will focus in my next entry on the “Incentive” piece of this puzzle.

Insurance is not a “Commodity”!

This discussion of Commodities centers around recent attempts by insurers to circumvent agents and sell insurance products over the internet.    I am convinced that insurance is not a commodity as it is not a product that can be sold in an unmodified state and be used properly.   It would be like purchasing an unassembled, complicated piece of equipment and having no directions for assembly.  It appears to me that is the case with “unbundled” “risk bearing” or to put it another way, the thing Insurance companies sell is a “risk finance” mechanism.    Agents add value to this product by showing purchasers how to use it and by adding their own body of knowledge to the process!

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We will explore what is a “Commodity”, why I think insurance is NOT a commodity, and what agents can do to more effectively distriblute the risk bearing product more effectively and more to the advantage of their customers!

Personal Insurance and Foreign Travel

This time of year Insurance Agents get calls, “I am going to “St. John” (or other locale) on vacation. Am I (the client) insured for THIS foreign travel?” If this happens in your agency, the ISO Homeowners territory is worldwide, YOU NEED TO CHECK THE UMBRELLA OR EXCESS COVERAGE TERRITORY, and the ISO auto policy insures in the “US, Territories, possessions and Canada. What ARE the US Possessions? Here is a quick, unverified, list for reference purposes.

The Commonwealth of Puerto Rico

Guam

The U.S. Virgin Islands

American Samoa

The Commonwealth of the Northern Mariana
Islands (CNMI)

The Midway Islands

Wake Island

Kingman Reef

Navassa Island

Johnston Atoll (an atoll is a coral island)

Palmyra Atoll

Baker, Howland and Jarvis Islands

end of list

If you use Insurers who use non ISO forms you will need to check the company’s form.