Reviewing a new clients insurance. The corporation owns no cars. They also have no coverage for an auto accident.
"So what?" says my client.
Your employee is driving to an appointment in her own car. She causes an accident.
She is going to get sued and so are you - as employers are responsible for the actions of their employees.
Buy non-owned auto liability insurance.
Your insurance agent is an important part of your insurance program. Without a strong agent, your insurance will be weak.
Your agent should be working with you at each renewal. Even if you are a tiny client to the agent your coverage should be reviewed at least once a year.
There are a great many insurance buyers out there who spend less than $1,000 a year on property and liability insurance. Frankly, that's about $125 in revenue to the agent. Not much.
Here are some pointers if you're not the biggest fish in your agent's pond:
-Have all your insurance with the same agent. Home, business, auto... That makes you a more important client to the agency.
-Don't expect 3 visits a year. A phone call or two can go a long way to making sure that you get the coverage you need. Do not demand face to face visits - unless you go to the agent's office.
-Refer business to your agent. If you are getting good service, recognize that by sending business the agent's way.
-Send a note to the boss. Find out who the agent's boss is and send a note of praise. This does not happen often and will make you more visible to the agent and agency.
Dump deadwood agents. Insist on good service. You may have to change agents. Do so sooner rather than later.
There are agents out there who want to deal with very small businesses. Even the largest insurance agency has inside people dedicated to smaller clients.
Talk to friends and associates to find out who they do business with. Check with the local chamber of commerce. Go to your trade group looking for agents who specialize in your industry.
There are too many good agents out there for any business person to put up with bad service.
As our dependance on both the computer and the internet grows, computer insurance coverage becomes more and more important.
Let's start with the exposures of the computer.
First, there is damage or loss of your "stuff." For example, your computer equipment is destroyed in a fire, or a voltage surge blows out your network, destroying your data. It might be a hacker or virus that corrupts your data to a point you can't use it.
Related to the property loss is the lost income that results from your computer being down. Often called first party losses, these impact you and your operations.
Liability exposures come from your negligence. For example, your network is down and customers cannot use the services they need. Your computer system could spread a virus that damages a customer's network. Perhaps hackers get access to your data and copy customer information.
Liability comes out of your actions (or lack of actions) that injures or damages another. These losses are known as third party losses.
Often, a first party loss can lead to a third party loss. Your data is destroyed by a hacker. The loss of the data prevents a customer from using your service, resulting in higher costs to your customer and a breach of your contract. Your customer sues you.
The following are examples of the two categories of exposures.
First Party Losses:
--Your computer is destroyed by fire.
--A mechanical failure causes your system to crash.
--Your computer is stolen.
--Your data is accidentally erased.
--Your data is not accessible to you because of a virus.
--As your computer is inaccessible, you lose revenue.
--You are the victim of an extortion where a caller demands $100,000 or he will divulge customer data.
--A data breach forces you to undertake a public relations campaign to minimize damage.
Third Party Losses:
--Your customers' data is published on a website.
--A breach of your system allows thieves to use customer credit cards.
--Your system infects a customer's system with a virus.
--Your employee accidentally erases a customer's data.
--An employee posts defamatory statements about a competitor on Twitter.
--A web design company accuses you of violating their copyright.
Talk with your insurance agent about these exposures and how your insurance responds. The standard insurance coverage (property insurance and general liability insurance) provide some coverage.
Some companies should consider cyber liability insurance. Talk with your insurance advisor.
When you report a claim to your insurance company, the data on the claim is almost always put into a database of losses.
Insurance Services Office (ISO) is an organization that shares claims, premium, and coverage information with participating insurance companies.
Here's info on the claim database.
Most commercial insurance policies are issued using ISO forms. Look at the bottom of your insurance policy forms. You'll probably find a copyright notice that shows Insurance Services Office.
This clearing house is a good thing for insurance companies, the industry, agents, and insurance buyers. Frankly, ISO and operations like it are the reason insurance operations are exempt by law from anti-trust laws.
Without the ability for insurance companies to share information, there would be even less standardization than there is now. Each insurance company would have to have its own policy forms written. Any similarities in coverage would be subject to an allegation of collusion. Insurance company expenses would be dramatically increased as each company would have to hire 30 times the number of actuaries to compute loss costs and perhaps hundreds of attorneys to defend policy interpretation lawsuits.
Only large insurers would survive a regulatory climate that did not allow the sharing of insurance information between insurance companies. Premium costs would rise because of lack of competition and increased operating costs for insurers.
The McCarran-Ferguson Act of 1945 established the antitrust exemption for insurers. The exemption is vital to the insurance industry and to commerce. (Of course many other industries could benefit from similar exemptions. That's a topic for another day.)
Marshall & Swift/Boeckh follows construction costs. They provide detailed figures on how much it costs to build buildings. They have been doing this a long time.
If you built a building in 2005, the service says, on average, that the cost of construction has increase by 15% to 22%, depending on construction type and where the building is located.
Have you increased your coverage amounts in the past 5 years.? I know some insurance buyers who have had the same building coverage amounts for the past 10 years.
Boy, won't they be surprised at how underinsured they are if they have a fire?
About 5 years ago I started a document on my computer that outlines what I think people need to know if I die.
Every six months I pull up the file and make revisions. It is not a will. (I have one of those too.) It discusses bank accounts, computer codes, life insurance policies. The object is to help those left with the details of sorting things out.
I list things like where I'd like to be buried, that I want to be cremated. I have left no question that I want my organs harvested like a peanut field - take 'em all. (Yes, I have a donor card and a signed paper in my will, and I've talked about it with my wife.) The most recent letter even outlines that I'm thinking about donating what's left of my body to a local medical school - I'm thinking about it. I have not decided yet.
There are details in the letter about my funeral and what I want.
I also say that everything is subject to what my wife wants done at the time.
To me this is part of risk management. I've watched families argue of what the dead guy wanted. I'm leaving no doubt.
The most recent version of the letter was just printed. I fold it up and put it in our home safe. I'll remind Kathy that it's there and again ask her to do a similar letter. One last time she will get to tell me what to do.
Rule of thumb: your home insurance will not cover your business.
Sure, there is a bit of property coverage ($2500). There is no liability coverage for your business. None, none, none!
If you run a business out of your home (like I do), tell your insurance agent. Consider business insurance coverage to protect your business stuff and for liability insurance.
Another tip: Insure your home based business with your home insurance company. It makes claims easier when you are only dealing with one insurance company.
Many small businesses buy insurance in the form of a package policy known as the business owners policy (BOP). It is a great tool for insurance companies to provide common coverage to a multitude of businesses (mostly retail and office exposures). Included are the usually needed property and liability coverages.
Within most BOPs is business interruption insurance without limit. Ya-hoo! Nobody has to figure out how much insurance to buy! Nobody has to fill out an onerous worksheet (see yesterday's posting on the BII worksheet). No thought is needed! The coverage is already in there and saints be praised!
Not so fast, Skippy!
Two big problems. (Yes, there are more than two problems. Let's keep it simple here.)
First, the BOP only provides coverage for loss of income and extra expense for 12 months. Two days ago I talked about running out of time. What if it takes 15 months for your building to be rebuilt? What if the damage done to your building was also done to many many other buildings, like in a hurricane? You may have to wait in line for contractors or your local zoning board may go on vacation and not get your building application approved for 4 months.
Second big problem is on the other side. Your business is up and running but the customers don't come to see you for a while. A damaged gift shop in Maine that reopens in February is going to be almost without customers until those nice New Yorkers and New Jersey people come up here in July. Your insurance company will pay loss of business income for March (most policies include 30 days of coverage to get up and running after your building is repaired.) You are going to have a tough April, May, and June, though.
Your agent should be working with you on getting the right insurance. Sure, BOPs are nice and easy. There are issues that need adjusting though.
Here are some of the business interruption issues to discuss with your insurance agent:
Coinsurance
Does your loss of business income coverage include a penalty for under insurance? Ask your agent. If the answer is yes, find out how to get rid of it. You may have to fill out a worksheet that helps to determine the amount of coverage you should buy. Many agents (and many insurance buyers) hate these forms. However, filling them out is the best way to tell if you have the right amount of insurance. Tell your agent you want the agreed amount endorsement.
Running out of Time
Does your policy limit the time that you can receive lost income payments? Most policies limit coverage to 12 months. Is that long enough? If your building were destroyed by a fire you may have all kinds of contractors ready to help. However, if a windstorm hits, you may have to wait for some of your neighbors. Running out of coverage after a loss is as bad as having no coverage. Don't forget that your local zoning boards and inspectors are ready, willing, and able to slow things down for you too.
Running out of Coverage
This is related to the worksheets I mentioned in the coinsurance item above. Talk with your agent about how you can be assured that you will not run out of coverage after a loss. Trust me. Few businesses really have enough coverage here. Fill out those worksheets!
Loss of business income insurance pays your lost profits and continuing expenses while your business is shut down after a fire or other insured loss.
Extra expense coverage pays your increased costs of operation with the purpose of getting you back into business quickly. EE pays for renting temporary quarters, advertising to get customers back, costs of wiring, and setting up your temporary quarters, costs of expedited shipping, etc.
Loss of rent insurances pays the income you would have received from renters had the fire or loss not occurred.
Business interruption from dependent properties pays you when a business you depend on is shut down. This could be a supplier, a customer, or a business that you depend on as a draw for customers (think about a restaurant outside of town, next to a museum - museum burns - the restaurant now has no customers).
All coverages above are triggered by damage to your property by a peril insured by your policy. If your building is damaged by a flood and flood is excluded by your policy, your lost income will also be excluded.
I urge clients to develop standards for the service they provide.
Forbes Magazine recently reported the IRS's standards for call center assistance. Their goal is to answer 71% of the calls they get within 12 minutes.
An we want these people to run health insurance?
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Chris Boggs of the Academy of Insurance pointed out an exclusion on most home insurance policies I had never thought of. The policy excludes liability from Barbie Jeeps operated off the residence premises.
Barbie Jeeps are those battery operated "cars" that kids sit in and ride down the sidewalk.
Now, certainly there is no specific exclusion. However, the Jeep does meet the definition of a motor vehicle and the exclusion is pretty clear. If it were a golf cart, there might be coverage.
Next time your kid wants you to buy a toy Jeep, explain to them that your insurance doesn't cover you.
(Tongue now removed from my cheek.)
1. Have a strong anti harassment policy
2. Enforce that policy
3. Conduct regular training
4. Insist on professional conduct
5. Investigate all allegations of harassment
6. Lead by example
Check out my book, How to Buy Employment Practices Liability Insurance.
Pass the word to your friends and colleagues!
Next week I'll be posting every day on issues around loss of business income. This is one of the most misunderstood parts of property insurance - misunderstood by insurance buyers and agents.
I'll try to remove the some of the mystery.
Stay tuned.
Earlier this week I helped a client fire their current agent.
My client had been working with the same agency for 20 years. In the past 6 years they have had three different service teams from the agency.
Other than that, there were no real service complaints.
We interviewed the current agent and three others as we tried to decide what to do for the upcoming renewal.
All 3 prospective agents made good presentations and offered advice and information not shared by the current agent. In the end, the decision was made to change agents because, (in the client's words) sometimes change is healthy.
The new agent is very excited to have a new account and is tripping over himself to get off to the right start. The client is looking forward to new blood.
Everyone has the expectation of a great result.
Of course, the old agent is not too pleased. I don't blame them for wondering what happened. They really did not do anything wrong.
As the client said, sometimes change is good. It doesn't mean that there are not wounds inflicted though.
I have no doubt that the change was the right decision. I write this to remind my agent readers that sometimes, despite your best efforts you still lose the account.
Agents, another lesson here is to figure out how to get honest feedback about how firm your relationship really is with your client.
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Scott lives in Maine and runs a successful consulting firm. He has worked with over 1,500 businesses in his 30 year career.
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