Commercial Insurance Rates Drop

The insurance publication "The Standard" reported in the 1/29/10 issue that commercial insurance rates continue to drop. The article reports on average a 6% drop, about the same as last quarter.

This is certainly what I see in the marketplace. However, if you do not bid your insurance, you may not see further reductions. Competition is the best way to get the best rates and coverage.

If you have not bid your insurance in the past 3 years, do it at your next renewal.

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Fire Inept Insurance Agents

The finance director of a rather large nonprofit called me a few weeks ago. She was having trouble with her agent and was unsure as to the quality of their coverage. She described a pattern of unresponsiveness from the agent.

I prescribed a review of the policies and then a plan of action based on the review.

I found several coverage issues as well as the fact that the organization had two D&O policies - one for the main org and one for a subsidiary.

I drafted a letter to be sent to the agent outlining the issues and asking for quotes and clarification. The client and I agreed that we would give the agent a second chance but keep him on a short leash.

A week after the letter was sent my client called the agent. No response. A few days later, same thing. Yesterday he called her and promised an email last night and a call today. He never followed through.

I advised my client to call the commercial lines manager and demand that the account be assigned to another agent.

Insurance agents are paid to serve the insurance buyer. Without the service who needs an agent?

Fire inept agents. They rarely reform. Their lack of service costs you time and money.

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Earthquake is Not Covered!

The horrible events in Haiti means that many of my conversations with clients include questions about earthquake.

Here is the short answer... Standard property insurance policies exclude earthquake. Home insurance excludes it and business property insurance excludes it.

The following exclusion is from a commonly used business property insurance policy:

B.1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.

b. Earth Movement

(1) Earthquake, including any earth sinking, rising or shifting related to such event;

(2) Landslide, including any earth sinking, rising or shifting related to such event;

(3) Mine subsidence, meaning subsidence of a man-made mine, whether or not mining activity
has ceased;

(4) Earth sinking (other than sinkhole collapse), rising or shifting including soil conditions which cause settling, cracking or other disarrangement of foundations or other parts of realty. Soil condi- tions include contraction, expansion, freezing, thawing, erosion, improperly compacted soil and the action of water under the ground surface.

But if Earth Movement, as described in b.(1) through (4) above, results in fire or explosion, we will pay for the loss or damage caused by that fire or explosion.

(5) Volcanic eruption, explosion or effusion. But, if volcanic eruption, explosion or effusion results in fire or Volcanic Action, we will pay for the loss or damage caused by that fire or Volcanic Action.

In most areas the coverage is available at an extra premium - sometimes a great deal of extra premium.

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Personal Injury

Most business people are familiar with the bodily injury and property damage coverage within their general liability policy.

There is another coverage section that is less understood. Personal injury coverage.

Think of this as coverage for hurt feelings - libel, slander, false arrest, wrongful eviction, advertising injury, and violation of privacy.

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Actual Cash Value

In the realm of property insurance is the issue of valuation. How much is something worth, and how much will the insurance company pay for a covered loss to that property?

Two primary insurance valuation methods - replacement cost and actual cash value.

Replacement cost is the - wait for it - cost to replace an item new.

Actual cash value is usually defined as replacement cost minus depreciation.

Depreciation in this case is not accounting depreciation. The adjuster will look at the useful life and condition of the property to come up with a depreciation factor. There is no rule or concrete calculation. It is largely a negotiated factor. Some states require that market value be included in the calculation.

All this should be utterly unimportant to most of you reading this as you SHOULD have replacement cost coverage. For most insureds, the desire after a claim would be to replace the item. If so, buy replacement cost insurance and avoid actual cash value.

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Mysterious Disappearance

Your watch is missing.

Was it stolen, or did you misplace it?

The distinction could be important when it comes to your insurance coverage. Check your property insurance policies for limitations to coverage for burglary and robbery. Assuming an item was stolen is not the same as knowing it was stolen.

Another great reason to understand the insurance coverage you buy.

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Loss of Your Records

Valuable papers insurance will pay to help you recreate your business records lost in a fire. Standard fire insurance will pay for the equivalent blank paper lost (yes, blank copy paper). Valuable papers insurance will pay for clerical help, and the expense of gathering the information lost.

Big deal! You're better off protecting the records you need. Be more specific here. You're better off protecting the records from being lost in a fire in the first place.

First, move your operation to digital copies of records. Scan and store paper documents. Back the information up.

If you must have paper files, plan to protect what you have.

The most vulnerable documents are those you are working on now. What's on your desk is at risk. Put your important papers away. Frankly, standard file cabinets do a pretty fair job protecting records. The best paper storage receptacle, though, is a fire rated file cabinet or vault.

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The Ten Commandments of Data Backup

I Thou shalt have a plan to backup your data.

II Thy plan must include laptops.

III Remote-est locations such as home-eth offices and telecommuters must be included in thy plan-eth.

IV Thou shalt test thy backup plan by deleting-eth a file and retrieving it to its proper place from thy backup.

V Your plan is run by mortals and will therefore devolve into chaos without review, testing, and monitoring.

VI Testing should be done without-eth any warning to your IT people -- just to piss-eth them off.

VII Thou shalt store backups off site, as mayhem will occur.

VIII The more complicated-eth your plan is, the more screwups will occur - think automatic-eth.

iX Include-eth hardware in your backup plan - how wilt thou get replacement hardware fast?

X Rince-eth and repeat-eth.

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Consumer Protection Laws Are Risky To You

Understand the Consumer Laws That "Protect" Your Customers

Go to your state's website. Search the term, "consumer protection." You may be surprised at the breadth of protections, prohibited practices, anti-trust issues, and the like that are outlined.
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Think of the negative publicity that can come from a local news story outlining your failure to follow what your state considers, "fair trade practices."

Many states have implied warrantee laws that require retailers and manufacturers to repair or replace goods well beyond the manufacturer's warrantee. Unfair trade practices are a web of rules that can trip you up in your dealings with customers, causing you legal expenses and negative press.

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Per Location Aggregate Spreads the Coverage

Add a “Per Location Aggregate Limit” to Your General Liability Policy

Your general liability insurance provides coverage for bodily injury and property damage. The policy contains an aggregate limit of coverage – the most the policy will pay for all claims.

If you have more than one location (two offices, two bank branches, a warehouse and a store, etc) read on.

Adding an endorsement to the policy that applies the aggregate limit to each location (rather than to all locations) expands your coverage at very little cost. In many cases, your insurer will add the coverage at no additional premium. Talk with your insurance advisor.

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Lost Wallet

A friend lost his wallet recently.

Have a list of the credit cards you carry plus the telephone numbers for the credit card companies.  If you lose your wallet you can quickly call to put a stop to further charges.

Obviously store the list someplace you can access - not in your wallet.

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Continuing Education

Last month I completed a self-study class and test on flood insurance as part of my state's continuing ed requirements.  A 25 question test - took me 10 minutes to complete - grade of 100% - earned 3 hours of continuing ed.

Sunday I completed a self-study class and test on insurance ethics.  Again, this was part of my state's continuing ed requirements.  A 25 question test - took me 12 minutes to complete - grade of 100% - earned 3 hours of CE.

So, I now have 6 hours of continuing ed credits after having spent 22 minutes on the effort.

I spent over $5,000 a year on books, subscriptions, and other educational materials.  I research and write articles on all manner of insurance issues.  I read policies and review other reviewer's materials.  None of this earns me a single CE credit.  I spend 22 minutes and $20, and I get 6 hours of credit.

What a screwed up system.  CEs do not protect the public. It just lines the pockets of testing companies, creates bureaucracy, and promotes a tremendous sense of mediocrity in the insurance business.  I'm no better an insurance person for taking those tests.  I'm no more ethical because I can figure out what answers they want to hear.

(By the way, about halfway through the ethics test I realized that the multiple choice option that was the longest was almost always the right answer.  After I finished, I went back.  If I had just marked the longest answer - without even reading the choices - I would have gotten 24 out of 25 right.)

I'm considering a master's degree in insurance from Boston College.  None of that work will gain me a minute of continuing ed.  I called the insurance department and was told there was no way they would approve college classes automatically.  The college would have to submit the classes AND FILE THE FEES.  Clearly, the state values continuing education! (sic)

There, I now feel better.

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The To-Do List on Steroids

To do or not to do, that is, quite literally, the question.

Few of us have the memory to keep everything in our heads. The To Do list is a time proven key to success. My approach involves four lists that work together to build a system for achievement, time savings, and success.

List One - A Reminder List

Some writers have called this a mind-dump. A place to put everything, big and little, that goes on in your life. This is a tickler/reminder system. It should include business stuff and personal tasks.

Full Article Here - My Insurance Journal Column

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Premium

Your premium is the price of insuring a specific risk over a period of time.

business insurance premiums are determined in a wide variety of ways.

Property insurance premiums are determined by multiplying a rate per $100 times the amount of coverage to be purchased.  A $1,000,000 building with a $.30 rate is $3,000 in premium.

General liability insurance premiums are calculated by multiplying the exposure base (payroll, sales, units, acreage, square footage) times a rate.

Workers' compensation premium is calculated by rate per $100 multiplied by payroll. 

Comparing premiums from one year to another has limited value.  Focus on your rates to tell how aggressive your insurer is being.

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Livery and Your Personal Auto Policy

Livery is carrying goods or people for a fee.

There are insurance coverage issues to consider when a business uses a personal vehicle owned by an employee.  Most personal auto policies exclude coverage when the vehicle is used for livery.  The purpose of the exclusion is to remove coverage for a vehicle held out to the public as being for hire - a taxi service or delivery service.

Policies usually specifically allow share-the-ride arrangements and car-pooling.

The question often comes up when a personal auto policy covers a vehicle used for pizza delivery and the like.  In many cases there has been coverage allowed as the vehicle is not for the use of the general public.

The healthcare field also presents issues when a nursing home employee is asked to transport a resident to a store or appointment.  Again, the livery exclusion may not apply (even if a fee is being paid to the employee to cover expenses) as the vehicle is not put out there for the general public.

The safest way for an insurance buyer to handle the situation is to call their agent - preferably before a claim - to find out if there is coverage should an injury occur.

An auto policy may provide coverage.  However, there may be an issue of premium and underwriting.  

Many insurance companies will shy away from the exposure of a pizza delivery vehicle or an insured who regularly trasports elderly people to doctor's appointments.  The insurer may want to charge commercial rates.

Read your policy.  Talk with your agent.  Get good advice.

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Are You Indispensable?

I'm about half way through Seth Godin's new book, Linchpin (available Jan 26 - but I'm a friend).

It's very good. Different from his other books, which I consider must reads (Purple Cow, Tribes, The Dip). 

He talks about the need for each of us to be indispensable. 

If you are indispensable you go beyond the normal, the standard, the mundane, the average, the dull, the boring. 

We built a house 6 years ago. After it was done I told my builder that I wouldn't build a doghouse without having him involved.

That's indispensable. 

Build yourself a place in the mind of your clients, your boss, your employees, your partner where they can not imagine being without you.

In other posts here I have touted the need to be remarkable - worthy of remark. That comes from Seth's book, Purple Cow. 

The aphorism is now, "Be remarkable and indispensable."

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Who Should Be Named Insured?

One of the most common mistakes I find in my review of insurance programs involves named insureds.

MyNewMarkets.com (a part of the Insurance Journal family) just pointed readers to a checklist the produced a few years ago.

Here are the questions they suggest:

-Are all current legal entities listed/scheduled on the policy (including LLC’s and Joint Ventures)?

-Is the entity listed as the First Named Insured the entity you want to receive all notices and billings?

-Any past partnerships or LLC’s as predecessor organizations?

-Any past subsidiary partnerships or LLC’s?

-Joint Ventures: Any current joint ventures? Any past Joint Ventures?

-Is the insured planning to acquire or form any new entities over the next 12 months? What will the legal structure be?

-Insured planning to take part in any joint venture in the next 12 months?

-Do employees drive their personal vehicles to conduct company business?

-Do employees ever hire or rent vehicles in their own name to conduct company business?

-Are there any contractual relationships requiring any outside entity be named as an Additional Insured (lease agreements, construction contracts, venders, suppliers, members, etc)?

You can download the survey form HERE.

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FIduciary vs ERISA Fidelity

The question came up yesterday when I was discussing the need for fiduciary liability coverage, "Do we need that plus the fidelity bond?"

ERISA is the federal law that governs employee benefit and welfare plans.  I makes administrators of plans personally liable for mistakes.  That's what fiduciary covers - think of it as errors and ommissions for employee benefit plans.

The ERISA bond is fidelity insurance.  It is coverage required by ERISA for theft or loss of the funds in a pension or other welfare plan.  Most often an employee dishonesty policy is used with an endorcement broadening out the coverage to meet ERISA.

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New Tag Line

I have struggled for ten years with a tag-line for my business.

Past interations:
Insurance Consulting Services
Unbiased Insurance Consulting
Unbiased Insurance Assurance

I really liked "Insurance Assurance" but the trademark office in Washington turned it down as too close to "Assurance Insurance" held by a broker.

Here is the latest:

Consulting In, But Never Selling, Insurance.

Comments welcome.

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