11 Jul Have You Read The Policies You’re Selling?
Curtis M. Pearsall, CPCU, AIAF, CPIA
President – Pearsall Associates Inc.
I recently noted the passing of an individual I had the honor of working with back in 1976 in my early days at the agency side of the business (S-Z for CL, PL, and Claims). Don was more than a colleague. He was my assigned mentor (I was 24 at the time). Don was brilliant in his knowledge of not only the industry but of the coverage the agency was selling. Early on, I asked how “he became so smart,” and his response was, “I have read the policies I am selling.”
Early in my 48-year insurance career, I was advised and educated on the value of reading the policies we were selling. This way, when customers had questions or issues, I would be able to know at least how policies were structured, what was typically covered, and the common exclusions. I carried on this tradition of reading policy forms for many years, and it served me well.
Does this concept of “reading the policies you’re selling” still have value? I think it has as much as, if not more, value than back in the ’70s. After all, it seems that every day, there is less consistency in the language of the various industry policies as carriers try to differentiate themselves or, quite possibly, to exclude an issue they have some concerns about. In the management liability segment (E&O, D&O, EPL, Cyber, etc.), there is absolutely no standardization, with each policy form being unique. In the E&S market, the differences can be even more drastic.
How many have Personal Lines agency staff read the Flood policy to know its coverage and limitations? Without this understanding, what is the quality of the advice the agency provides on this key coverage?
Even a GL policy with one carrier may vary from a GL form with another. The same for umbrellas, property policies, personal lines, etc. While this is especially true when comparing a policy in the standard market with one in the E&S market, there can still be differences for policies in the standard market. While umbrellas are often thought of as “follow form” over the underlying, this is certainly not always the case. There are umbrella forms in the market that say that if the underlying coverage is not at the proper limit, the umbrella will not respond AT ALL in the event of a major liability claim. Reading that coverage form shocked me.
The differences can be varied, including unique coverage grants that make the coverage more expansive. However, there is also the possibility (and it somewhat common) for limitations and exclusions to find their way into these policies. Some of these exclusions/limitations can be extremely significant. The Classification Limitation endorsement always comes to mind that limits the coverage provided, especially for contractors.
For producers, including internal staff involved with working with producers, it is heavily suggested to read the policies you’re selling to know what coverage is provided and excluded. I have heard from several producers with E&O Plus agencies that by knowing the exclusions in the policy, they could “identify the pain” for a client, and through this process, they could secure the account.
Imagine working on a construction account, and the producer notices the customer using a drone to monitor construction sites. If there was no drone coverage in place and a loss occurs, this is when the customer would no doubt find out there is no coverage. There is a good chance that the client would allege that the producer saw those (uncovered) activities being performed and did not say anything. How that would wind up is anyone’s guess. If the producer read the policy and thus realized that drones were not covered and brought this to the client’s attention, there is a good chance the client will want coverage for the drone. The bottom line, the producer just sold more insurance.
Bottom line, many successful producers have increased the chance of landing an account by bringing to a prospect’s attention an exclusion in their current coverage dealing with a significant part of the prospect’s business. For producers, this is showing your true value. Knowing policy language is an important part of the selling “equation.”