If you’re having trouble sleeping, try reading an insurance policy. It’s sure to cure your insomnia every time.
For most customers, trying to figure out what is and is not covered in a commercial insurance policy is mind-boggling. It’s also not the most entertaining pursuit.
On the other hand, it’s one of the most valuable jobs commercial insurance brokers offer in the insurance business. Even if you don’t personally have the expertise to do it well, I can assure you there are individuals at your agency or carrier who are experts at it, with the knowledge and experience this skill requires. And regardless of whether it’s a broker who analyzes a policy or other employees within their company, my personal observation is that most of your clients don’t fully appreciate the value you’re delivering in terms of doing this well.
I recommend you make that value clearer to your clients. Given that the insurance policies are written by the insurer, many may believe they are stacked against them, leading to the impression that it will be difficult to get claims paid. By showing the depth of your company’s analysis and the attention paid to these very complex documents on their behalf, you can demonstrate how they benefit.
This can be a major selling point for you and your organization. It starts with explaining what analyzing a policy entails:
- Most customers don’t read their policies carefully. They depend on us to do that.
- Unlike books, insurance policies are not designed to be read sequentially. Sections of an insurance policy interrelate to and depend on interpretation on each other, which requires special analytical skills. This often requires moving back and forth between sections to interpret what is and is not covered. For example, insuring agreements explain how, in certain circumstances, a policy will provide for benefits in dollars or services. But those circumstances are impacted by, among other things, conditions, exclusions and, possibly, endorsements. And coverage is also predicated on having a legal contract. One of the elements establishing a legal contract is “competent parties.” This can relate to whether an insured party has an “insurable interest” in the asset insured. But that insurable interest status may be changed, sometimes inadvertently, by the insured or their representatives, which may jeopardize or invalidate coverage. Another example relates to terminology, such as real vs. personal property; the classification of an asset as one or the other can make a difference between whether or not an asset is covered, and under what valuation and settlement methodology the asset will be subject to.
- Punctuation matters. The presence or absence of a comma in a sentence, for example, can result in a coverage that might be broader or narrower than expected.
OK, I know this sounds excessively geeky, and your client may not be interested in hearing about it. All they want to know is whether they’ll have coverage for a loss, right?
That may be true but, again, my premise is that being able to show a client how and why the coverage will be there (or not, if your analysis shows that the coverage is not adequate or properly structured for their current situation) is an incredibly important value-add you can bring to the table.
One thing is certain: The worst time to find out whether a client is covered for something is after the bad thing happens. Which is a great way to promote the value of an effective, comprehensive insurance policy analysis.
At a minimum, effective insurance policy analysis requires:
- A comprehensive understanding of the client’s current business, circumstances, goals and objectives
- Identification of the business’ unique risk profile that may generate unusual or unique loss exposures
- A thorough, comprehensive evaluation of a client’s insurance coverages to systematically determine how and whether coverages will respond based on those unique loss exposures
- Performance of a “stress test” to determine whether and how the existing or proposed policy (or policies) would respond to different types of losses, some of which may be unusual or unique to the business
- Determining what combination of risk management strategies (e.g., avoidance, reduction, retention and transfer/insurance) can address loss exposures in a cost-effective way
- Ongoing review and analysis of business and market conditions so that coverage and risk management strategies can be revised when necessary (not “if necessary,” because the only constant is change, and the need for continuous revision is inevitable)
The Zurich Academy offers a popular continuing education-accredited program on this topic, “The art and science of insurance policy analysis.” For more information, visit our course lineup and find this program under the “Practice Management” tab, or contact me if you’re interested in learning whether your organization qualifies to have us deliver this training onsite at your office.
As always, I’m interested in your comments and suggestions. Please email me.
Find more Account Development Tips here.