How strong is your focus on training?

Let me ask you a couple of questions…

Five years from now, how many of the current agency staff will have retired? Where will your agency find qualified people to replace and train them? In addition, as the agency grows in volume, there is a good chance that additional staff will be needed to fill the necessary job responsibilities. How will you train those new staff?

As we all know, learning insurance and its various nuances is not easy and definitely takes time. There is a good chance today that many agencies have internal and sales staff that don’t know insurance to the degree they should and since agency staff can be held accountable for what they say, this presents a very scary picture. In fact, when some E&O carriers look at their statistics that are driving E&O frequency, lack of sufficient product knowledge is high on the list. Clearly, agencies need to have a solid focus on training to ensure their staff know the products they are selling.

There are a variety of approaches to the training of sales staff on the various technical elements of insurance. A key issue is that someone in the agency clearly needs to “own” this issue. This person needs to do the proper evaluation and develop a structure that provides the training to the needed areas. The evaluation could be done using a test or possibly a mock sales presentation where the staff are asked various questions on specific coverages. Some additional approaches to consider:

– Weekly classroom environment where a specific type of coverage / type of business is discussed and the exposures dissected. Consider asking your carriers if they can help.
– Your state agents’ association. They may have some training scheduled on various topics or could possibly at least recommend someone if needed.
– Training organizations such as the Institute or the National Alliance.

Bottom line, training of staff needs to be a key issue within every agency. This will hopefully result in staff knowledgeable on the coverage they are selling but it should also minimize the potential for your agency to face an E&O claim.

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Unmarried couples living in the same household – a potential E&O issue?

Today, this is quite possibly much more of an exposure than in recent years – couples that have decided to “live together” without getting married. If the homeowners’ insurance was not modified, would there be coverage for the additional person if a loss occurred? There are some issues that could determine this.

First, it is important to look at the definition of “Who is an Insured”. It is common for this to read as follows:

“Insured” means a) you and residents of your household who are (1) your relatives or (2) other persons under the age of 21 and in the care of any person described in a. (1) of this provision. Thus, using this policy language, if the unmarried couple bought a home together (in both of their names), I would guess that most carriers would be willing to issue one policy with both names as the named insured. Thus, coverage for both parties should be in place.

But what if the home was only in the name of one of the parties, would there be coverage for the other person? Technically they don’t meet the definition of “who is an insured”. Thus I would conclude that “no, there would not be any coverage – no property coverage nor liability coverage.”

If the additional person has substantial personal property, it would be prudent to check with the homeowners’ carrier to see whether they can be added and thus covered. If that will not be allowed, the additional person should look to look to purchase a separate renters’ insurance policy. This should be easily accomplished.

This is all well and good provided that your agency is aware of this exposure and can find out the necessary details. However, is there the possibility that you have clients with this exposure that have not given any thought to the insurance implications?

Might be a question to add to your new and renewal business questionnaires and checklists.

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1 in 10 homeowners have this exposure – is it properly insured?

The most recent statistics lists 9.4% of households rent a storage unit and this percentage does not include how many of those actually rent more than one unit and short term renters that rent a unit for a month or two while moving.

Bottom line, this is a quickly growing industry that many customers are utilizing. As you will note, without the proper coverage, there are some definite uninsured exposures.

When consumers rent a storage unit, they are probably under the impression that they have the proper coverage. Yes, the homeowners policy does provide coverage, typically for 10% of the personal property limit in the HO policy. Obviously based on that limit, there may not be sufficient coverage. For example, customers with a $50,000 personal property limit would only have $5,000 coverage. Is this enough?

However, there are some other differences that folks renting storage units may not be aware of that are quite significant. Issues such as:

– Most HO policies do not provide coverage for losses from rodents or flood and certainly not for earthquakes or named storms while in storage. If coverage for these exposures is desired, it may be available through the homeowners’ carrier but at a hefty premium.

– Loss of personal property in the storage unit is subject to the HO deductible, oftentimes in the $1000 to $5000 range.

As with many other exposures (such as my recent posting on watercraft detailed), purchasing a stand-alone policy for this exposure may be the best approach. Coverage including the exposures mentioned above is available through organizations such as SnapNsure ( – underwritten by Hanover). These policies provide broader coverage yet are inexpensive with low deductibles compared to HO policies. The deductible for all primary policies up to $25,000 coverage is only $100.

Although this coverage is sold direct to the public, it might be an opportunity to educate your customers and to provide them with a resource to more fully address this exposure.

Continue Reading: 1 in 10 homeowners have this exposure – is it properly insured?

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“Stated value” vs “Agreed Value” – aren’t they the same?

No, they are not.

Which one is better? Let’s take a look…

Here is the traditional definition of “Stated Value”:

“In the event of a total loss we will pay the Stated Value or the Actual Cash Value, whichever is less.” Note the word “less”. This essentially allows the carrier to adjust the loss on an ACV basis.

To get the protection desired, the better approach is to secure coverage on an Agreed Value basis. How does that work? It is often referred to as “short and sweet”. The carrier and the insured reach an agreement on the value of the item (car, boat, etc.). In the event that the insured item is damaged or destroyed, the insurance company pays out the agreed upon value – no more, no less.

To secure this level of valuation, it may be necessary for you (as the agent) to look at specialty carriers. This is often one of the areas where the coverage form is better.

“Stated Value” is definitely not the same as “Agreed Value”. This is probably one of the big misunderstandings in the insurance world.

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Is coverage for watercraft sufficient under a HO policy?

Now that it looks like winter is over and we are going right to summer, you might have some clients looking to put their boats in the water for some fun and relaxation. When insuring watercraft, there are typically a couple of options. The HO policy can be endorsed (provided the watercraft meets the guidelines) or the watercraft can be insured on a separate stand-along policy. Is there a difference in the coverages? Yes, and actually many of the differences involve areas that occur with some degree of frequency.

Issues such as:

  • Waterskiing (or tubing). If this is a potential scenario, be aware of some limitations on the HO policy. If one of the water-skiers gets hurt and needs some medical attention, there is a good chance that the Med Pay coverage under the HO policy will not respond.
  • Pollution. If gas is accidentally spilled into the water (yes, it happens), there will probably not be any coverage under the HO policy for this “pollution” exposure.
  • Towing / wreckage. If the watercraft is involved in an accident that results in the boat needing to be towed to shore, this is not a peril insured when the coverage is placed on the HO policy. In addition, wreckage removal is not covered by most HO policies.
  • Valuation for physical damage. The options under a HO policy are more limited typically only providing coverage on an ACV basis. Securing the valuation on an “Agreed Value” basis is definitely preferred.

So how do you secure coverage for the above issues? A good best practice is to provide your client with a proposal for a stand-alone watercraft policy. The premium will be higher but that is because the coverage is better.

If you are thinking “the client will never spend the extra premium”, quite honestly, this is not your call. It is best to provide the client with options and explain the difference and the value of a stand-alone policy. Thus, when dealing with your clients on their watercraft exposure, provide them with options to consider. Not only will this allow your client to make an educated decision, it will also serve as an element of protection should an uninsured loss occur.

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Include specimen policies with the proposals

Have you ever had a situation where your client had a loss before the policy was even issued? It happens, and it actually happened to me back in my days as an underwriter. My account (a big printer) had a Mercedes stolen before I even had the policy issued.

What if your client had a loss before the policy was issued and the claim was denied due to some exclusion in the policy? The client could contend that they had no knowledge of what the exclusions were and might go so far as to state that they would not have purchased the coverage had they known all of the exclusions.

Would they have a case? The agency might have somewhat of a defense if they had listed the exclusions on the proposal. Unfortunately, the titles provided to some of those exclusions might not provide enough clarity as to what the exclusion actually excludes.

Listing the exclusions (or at least some of them) is a good idea. However, if you are going to list some exclusions, it might be best to include the following statement: “Exclusions include but are not limited to the following”.

There are a couple of additional approaches.

        Include specimen policies with your proposal. This might be cumbersome to do this for all coverages, but it is especially important on coverages (such as E&O, D&O, Cyber, EPL, etc.) where there can be significant differences among the various carrier forms.

        Include a statement in the proposal that “Specimen policies are available upon request”. This is extremely easy to implement and probably won’t result in many clients actually asking.

 As I have noted in probably every E&O class I have ever taught, at the time of a problem, there are two buckets. One bucket for the client which would include all of the issues that favor the client. The other bucket is for the agency and would include those issues favorable to the agency. The goal is for the agency to have as many items in their bucket as possible. Including specimen policies or even the statement that “specimen policies are available upon request” would be an item that would be in the agency’s bucket.

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Does your proposal include this?

Let me ask you a question:

When you provide a proposal to a client (current or prospective), what information are you using to develop that proposal? While there may be some information you can gather from websites or other third party sources, aren’t you, in reality, using the information that the client has provided you?

What if that information is not totally correct? If the policy is written and the client suffers a claim, this is often the time when the carrier discovers some inaccuracies in the application. Based on the degree of those inaccuracies, the carrier may look to deny the claim based on a position that “they never would have written the account had they known the correct information”. Your agency’s position may be “we used the information the client gave us”.

There are some defenses that could be used but obviously only if they were in place.

One of those defenses should involve requiring (not just requesting) the client review the application before affixing their signature. Using a statement such as “I certainly believe that I have taken down correctly the information that you provided me so I would like to have you sign the application. However before you put your signature on the document, please review the application and advise me if there are any answers noted that you do not feel are accurate”.

Another approach to provide some degree of protection in the event of a problem is to make it very clear to the client that you used the information they provided you. To assist in protecting your agency in the event of an issue, give thought to including a statement such as:

In evaluating your exposures to loss, we have been dependent upon information provided by you.  If there are any other areas that need to be evaluated prior to binding of coverage, please bring these areas to our attention.  Should any of your exposures change after coverage is bound, such as your beginning new operations, hiring employees in new states, buying additional property, etc., please let us know so proper coverage can be discussed.

Following some simple steps could make a world of difference if a dispute arises.


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More School Districts Buying Active Shooter Insurance

As noted in the attached article written by Noor Zainab Hussain and Suzanne Barlyn that appeared on on March 21st, recent events have resulted in more schools seeking additional protection. While this article focused on schools securing this coverage, there are other venues that should also consider this coverage such as malls and  theatres. This coverage should be discussed with every client that presents this type of exposure.

“Insurance broker Paul Marshall can count on his phone ringing in the aftermath of a school shooting. Since the Feb. 14 shooting at a Florida high school, where 17 people were killed and more than a dozen injured, seven South Florida school district have bought $3 million worth of “active shooter” coverage…”

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In 5 States, 20% or More of Drivers Have No Insurance; Countrywide Average Increases

Every day, we get behind the wheels of our car and venture off to work, vacation, run errands, etc. Personally, there is an expectation that every car I see has at least the minimum limits of liability insurance but as you will note in the attached article, this is hardly the case. This is one reason why discussion with your clients on UM / UIM is so critical.

This is an excerpt from an article that appeared on on March 15th. The article includes the statistics for every state. How does your state compare?

“Nearly one in eight U.S. motorists is driving around uninsured and putting insured drivers at greater risk in the event of an auto accident, according to a study.

The study, directed by the Insurance Research Council (IRC) and co-sponsored by The Hanover Insurance Group, found that 13 percent of all U.S. motorists were uninsured in 2015, up from 12.3 percent in 2010, following a seven-year decline from a high of 14.9 percent in 2003.”

Continue Reading In 5 States, 20% or More of Drivers Have No Insurance; Countrywide Average Increases

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How does your E&O policy address “subpoenas”?

One only needs to access the news on virtually a daily basis to hear the reference to a subpoena. It is vital that agencies (especially management) be aware that the word subpoena can find its way into the insurance agency world. What exactly is a subpoena?

Wikipedia provides the following definition:

“A subpoena or witness summons is a writ issued by a government agency, most often a court, to compel testimony by a witness or production of evidence under a penalty for failure. There are two common types of subpoena:

  1. subpoena ad testificandum orders a person to testify before the ordering authority or face punishment. The subpoena can also request the testimony to be given by phone or in person.
  2. subpoena duces tecum orders a person or organization to bring physical evidence before the ordering authority or face punishment. This is often used for requests to mail copies of documents to requesting party or directly to court.”

How do E&O policies reference subpoenas? Most often, one will find the reference in the definition of a claim with language such as: “Claim” means a written demand or written notice, including service of a subpoena….”. 

So, what does this mean if your agency is served with a subpoena? Chances are the subpoena is a request for records or documents of some type. While this may sound harmless, this is not a matter to be taken lightly so the best approach is to:

Contact your E&O carrier immediately !

The reason to do so is that there is a good chance that your agency could be party to an E&O claim in short order. By contacting your E&O carrier, 1) you are satisfying a condition in your E&O policy and 2) you are going to benefit from the experience and expertise of that carrier.

What is the downside in failing to contact your E&O carrier? Unfortunately, this has occurred from time to time and has resulted in the agency potentially not getting the necessary coverage when a lawsuit or E&O claim develops. If the agency were to receive a subpoena and not notify the E&O carrier, when an E&O claim develops, the carrier could take a position of “denied for late reporting”. 

So, when your agency receives a subpoena, take it seriously. Make sure that all staff are aware of the importance of this issue so that they can take the appropriate action.

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