06 Jun Are Clients Reducing Their Limits?
With our current economic times and many families looking to tighten their financial belts and explore opportunities to reduce expenses, insurance is a common target. I have heard from many of the agencies I am honored to work with that they received an increase in phone calls/emails from clients asking questions about their current coverage during the pandemic. It appeared that many families were reading their policies and discovering what coverage they had and what coverage they didn’t.
Some frequent questions dealt with issues such as:
- “Do I really need my personal umbrella?”
- “Isn’t a $1 million umbrella enough? After all, they can’t sue me for what I don’t have.”
- “Where can I cut my coverage and save some money?
I am sure many agencies can easily add 5-10 more common questions.
These are very important discussions and ones that need to be handled delicately. Hopefully, these questions and the appropriate answers were discussed internally to ensure a somewhat consistent response. In addition, how these conversations are documented is of vital importance.
First, I believe that the limits that clients choose are their decisions. If they want to drop their umbrella, that is their decision. The key issue is providing the client with information to help them decide, such as:
“We can cancel your umbrella, but accidents involving injuries with insufficient primary coverage are becoming much more common. And please understand, they can sue you for what you don’t have. How about increasing the deductible on your comp or collision, saving you the same amount as canceling your umbrella?”
I know this was rough, but I trust you get the picture. The difference is that the “limits of coverage” is where the big losses come from. Dropping the auto limit from 100/300 to 50/100 can be a significant issue if an accident involving bodily injury occurs. Increasing the collision deductible from $500 to $1,000 technically only adds $500 in the event of a collision loss.
One additional issue and one I have been asked a fair number of times over the last year – “Our agency has a minimum standard of 100/300 for BI limits, and the client wants to drop their limits to 50/100. Can we non-renew the account since they fall below our limit standard?”
I am not an attorney (this is my disclaimer), but I doubt an agency can do that. I suggest advising the client of the pitfalls of doing that and suggesting other options that will result in cost savings. If the client wants to reduce their coverage, it is reduced. These are definite situations where memorializing back to the client their purchase decision is of utmost importance. This practice will help if a problem occurs and the client alleges that reducing their coverage is not what they told you to do.
The main focus of this article was on limits. Still, please understand that reductions in coverage can take on many shapes and sizes, and agencies should have documented procedures on how these discussions are expected to be handled.