What do you anticipate for the premiums you pay?
If you were asked today, "Are you happy with your current insurance agent?" Your response would be "Yes!". This would probably be followed by; how trustworthy he or she has been, how you have had a friendship for all of these years and how he or she has remained more competive by far than others who have provided you quotations.
Your agent receives, for selling and servicing your account, a percentage of the total premium commissions which are paid to the agency. Agency commissions are usually between 10-25% in property/casualty products and possibly higher for life and health benefit products. Dependent upon the producer's production contract and book of business, an agent may receive 35-60% of the agency's commission for a policy.
Money paid for services rendered is one of the largest motivators of Agents. Sometimes, if the services required by a client are preceived to be higher than what normal commissions could be offered for in time and money spent (i.e. constant changes to a large fleet, stock reporting, retrospective rating issues or the mailing/postage costs of certificates of insurance) a fee may be charged.
Fees are also charged by large brokers who analyze your financials, the bottlenecks of your company and your current existing programs to provide a prospectus to other agents to bid on your insurance. They then review all proposals for the client and make a determination of who provided the best possible price for the insurance available.
Most states require that the fee be shown up front or separate from the premium, so that the producer will have to provide you with an explanation of why the charge is being made.A respected knowlegeable agent will have coverage issues resolved and more difficult risks written with Insurance Company underwriters than the agent who does not have those qualities.
All underwriters are professionals versed in all aspects of the coverage issues they are involved in. Marine Underwriters (Ocean, Inland, Transportation...) prevalently were the leaders of such creativity as were senior underwriters in areas of casualty products and retrospective rating products.
Underwriters appreciate Agents who have product and coverage knowledge. And, ultimately you, the client, secure the benefit. The conditions pertaining to whether you may be offered the appropriate coverage prior to a loss, of course, depends upon your ability to question and secure an answer in advance of a loss occurring. These answers and possible suggestions of handling the issues will be provided by a knowledgeable agent.
The day has slowly ended for agents who have provided perks to an underwriter in order to violate underwriting rules to the benefit of a client. The underwriter's ability to receive raises or bonuses may be jeopardized if an underwriting profit is not made. And there have been many an underwriter who have lost their job because of risk misclassifications made as a favor to an agent.
Your Agent must be versed in the products and the underwriting guidelines of each insurance company they represent. This will assure you the ultimate match with insurer and coverage issues.
The marketplace itself has its share of problems. Before the Construction Defect litigation began, one insurer provided a profitable program, similar to a businessowners policy for specific tradesmen involved in residential construction. Through no fault of many of these tradesmen, and only because they did minor work or installed a product, they became part of the litigation. It did not matter that they were not responsible for the loss, they still, in some instances, were required by the judicial system to pay a percentage of the total judgment and litigation and defense costs soared.
The insurers having paid millions of dollars in judgements, attorneys fees and court costs, elected to remove its' product from the market and no longer provide coverage for residential contractors. To make matters worse, other insurers started to remove contractual and products/completed operations liability coverage from their commercial general liability policies. As a result, some clients could not fulfill their construction contracts because their premiums could not be included within the cost of doing business and some businesses folded because of their inability to be provided insurance at a cost that they could afford.Whose fault is it, if you are unaware of an insurance situation that may affect your business?
You are, of course, responsible for the ramifications of such an event. MAKE CERTAIN YOU HAVE A COMMUNICATION LEVEL WITH A RESPECTED AGENT WHO ADVISES YOU OF CHANGES IN THE INSURANCE INDUSTRY WHICH MAY AFFECT YOUR BUSINESS SPECIFICALLY.
More importantly, ARE THERE SOLUTIONS THAT MAY BE GIVEN? Is your agent or the agency taking an active role in securing new legislation to stop such unnecessary litigation?
Has your agent asked you and others in your industry to assist in bring forth better legislation?
IS YOUR AGENT ASSISTING YOU IN THE REVIEW OF YOUR LEASE, CONSTRUCTION OR REAL ESTATE CONTRACTS? There may be clauses within a contract itself which would be against all principles of insurance or which require additional coverage that you currently do not carry. Under most contracts, there are provisions that require specific insurance coverage to be retained, without which you will not be paid for your work...or it will cost you additional funds because of an alleged breach of contract.
A producer may be a salesperson, not versed in all aspects of underwriting and products. The Agency however should include individuals on staff that can read and apply such insurance clauses in a contract to the policy coverage provided an insured. If there are questions that cannot be answered by the agency, an underwriter may be contacted by the agency for expert review with their legal and claims personnel. And, last but not least, you may take the contract to your own attorney.
Although insurance agents are not lawyers, they should be familiar enough with their insurance contracts to know whether or nor a client has the coverage required in the specifications of a contract. If some requirements may not be met, they must be so stipulated before a contract is signed by you.
WHAT DOES YOUR INSURANCE AGENT PROVIDE YOU AS SERVICES? Is there someone reliable to answer your inquiries when your agent is out on calls? Does this person handle your inquiry in a prompt and courteous manner? Does this include a verbal exchange followed up by a confirmation in writing or by providing you with a copy of the change request or order forwarded to an insurer? Are your claims handled by the agency in a prompt manner so that they are executed by the insurer's claims staff immediately, especially when losses are associated with bodily injury and property damage including structual damage which requires immediate specific professional expertise.
Is the agency staff following up with you and the insurer's claims adjuster.Are additional products offered based upon your personal growth, such as directors and officer's liability coverage, employment practices liability coverage, professional liability coverage, and worldwide marine coverage ?
In all probability, if your producer or the agency is not suggesting other coverage which may be required by you, they are responsble for any legal actions you may have against them for any such error or omission. Even something as simple as a move to another location can require some additional coverage, such as assuring a prorata distribution clause or other provision covers your property at two locations or whether you carry transportation coverage.
Motor Truck Cargo liability carried by truckers is a legal liability coverage that does not include such things as acts of God, government action such as seizure and confiscation nor does it cover damage to the product due to poor packaging. Further the trucker may have provided you with a released bill of lading which provides you a dollar amount per pound. You definitely would need your own transportation insurance.
These are the types of issues your insurance representative or agent should handle for you.
Another factor may exist. Your premium may indicate you obviously do not have the exposures of the larger accounts within the agency. Or, you are a preferred risk for class rating.If you are not writing your account with a direct writer who handles mainly small business accounts, then your independent agency probably has one or two individuals that strictly handle your account, rather than a producer. The individuals in charge at the agency will provide all of the benefits provided a larger account, but because you may not have the more complicated coverage requirements, less communication may be required and the company may directly service your account in lieu of the agency.Other agencies may elect to faze you out and send you to direct writers (insurance company representatives who sell insurance that is ultimately owned by the insurance company).
Insurers today, in order to save money have programs online providing agents the ability to quote, provide proposals and issue policies and endorsements. These programs apply strict underwriting adherence and lower rates of commission are paid to the Agency. Your policies will be renewed automatically and the company has direct contact with you if there is a billing problem. Unfortunately, you may not look to the agency for assistance but must contact the company directly at their toll free number. Your claims also must be called in directly to the insurance company.
Occasionally you will find a novice or creative agent who has decided their very good acquaintences should have a good premium break. So they creatively change loss criteria or change a classification so that they may fit you into an economical program which you would not have been in had the information not been fraudulently submitted to the insurer. So what happens, if there is an inspection? Or what happens if you turn in a claim? You probably will be covered, but you face the probability of being canceled or non-renewed by the insurer, a stigma you do not need when you are again in the marketplace for a new policy. And, your agent either may be slapped on the hand or the agency contract will be dropped losing a valuable insurer. Perhaps you should reconsider the matter, if offered such an alternative. There is too much to lose.
You are proud to advise that your agent has always been able to beat everyone's pricing. Certainly pricing is a trigger but have you really reviewed and compared the proposals offered? Remember when it was stated that everything was classified? Each classification and each type of building construction and the occupancy within a building carries specific or class rates. To the class or manual loss cost rates, are added the insurers expense and profitability factors. Therefore, each insurer may have a different rate for the same class. And there are classifications one insurer will write which another will not.Your agent also is responsible for the marketing of your account to various insurers to secure the best pricing in comparison to the coverage which is required. And, unless something is terribly misclassified, once the final pricing is achieved, there usually is not alot of room for further reduction, other than reducing the agent's actual commission. It may not be possible to drop the agent's commision without dropping services.
You must also determine if you are comparing apples to oranges or apples to apples? Usually your property premiums are fixed (exception: output policies or stock reporting) and are not subject to adjustment unlike liability premiums. Your projected sales or other exposures are subject to audit or adjustment and an additional or return premium is developed based upon your actual sales or exposures such as payroll at the time of such audit. The rate per $1000 of exposure should be your determining factor. If you have a banner year, it could ultimately increase your premiums drastically at the higher rate per $1000 proposed. And the total premium of the lower priced policy, may ultimately be the most expensive of all proposals because of the higher rates provided per $1000 of exposure.
Make certain also that all the same exposures have been used by all agents in their proposals offered to you. It may be mentioned that if your company has a low loss ratio, the insurer will not readily increase your premiums at renewal except for statewide rate increases and other filings that will change premiums across the board. Therefore, a company that has been unable to write your business but who has quoted year after year, may decline to quote in the future, without even reviewing the specifications.
Marketing year after year may prevent you from being provided the best possible coverage at the best possible price. Your insurer desires to retain you as a client as much as your agent does. An Agent should market accounts dependent upon market conditions.
There also may be other provisions to determine. Let's say that you currently have a $1000 deductible for property damage. Your agent must apprise you whether this deductible applies per occurrence, per claim or per claimant. Each policy may have a different meaning of each definition and in more recent policies per claimant meant the same as per claim.. One could have many claims in one occurrence and many claimants in one claim.
Again, choose an agent or an insurance representative who has your best interests in mind.
Lastly, IS YOUR AGENT HONEST AND FORTHRIGHT? Most of the time, if there is a premium or accounting problem, it is due to a mistake in the entry or handling of receivables.
Usually you will receive a statement either from the insurance company or from the agent, dependent upon who is responsible for such invoicing of premium, which you may review and have corrected if a mistake has occured..
Since additional points may be charged by the agency through a company who finances premiums, you may elect to secure your own financing, or ask for an insurer direct bill financing program. However, with multiple changes, agency billed accounts may still be the easiest to understand.
Not every agent or agency however, is honest. One of the most common conversion practices pertain to clients with credit balances. Some states stipulate the time frame in which the money no longer has to be returned to you if it is not claimed. Some agencies purposely do not provide you with a statement showing a credit balance owing you. A letter which has never been sent to you simply has been filed with the statement and someday in the future, the premiums disappear into one of the agent's accounts.
In another instance, an agent did not send a client an audit premium statement that would allow a return of $10,000. The agency principal instructed the CPA to move the money over to another account. Fortunately, the CPA confided in someone who did not fear the consequences of their actions. The client was contacted, asking whether the insurance company had yet performed the audit. The client then contacted the agent to determine whether the company had calculated the audit and if they could receive the results, because they true ly expected a return premium.
Most agencies are very honest and forthright. Just make certain your agent is one of them.
In summation, if you are provided fair and equitable insurance premiums, and are assured that your agent or insurance company representative is providing you with the best coverage and service possible, you are fortunate. If your agent is providing you with information relating to insurance issues which may involve your business, you are indeed fortunate.
And, if your agent has the knowledge to assist you with difficult coverage decisions and who shows honesty and integrity in all of his or her dealings, you are at the top of your game. Retain this agent. He or she isa a keeper and definitely deserves your loyalties.
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|Reviewed by Hanley Harding
|Hmmm... this is a helluva lotta info to digest! There's a whole lotta good stuff, here. Maybe you might want to write a concise insurance manual or handbook for the education of the average consumer, breaking things down by Category / Chapter. I think it might have some sales potential!