LEARN INSURANCE

What do you think of when you hear the term "All In"?  I think of a poker player who is so confident in his ability to win a hand that he is willing to put all of his chips on the line.  I also think of an entrepreneur who is so confident in his ability to make his business work that he is willing to put all of his resources and the livelihood of his family on the line to make it happen.  There are many people in our business community who have committed everything to building a successful business.  This is what it takes.  You have to be "all in".  There are many factors we can control when it comes to building a successful business such as hard work, providing good service, fulfilling a need, developing good products, and hiring quality people.  Essentially, we are able to choose the hand we are dealt.  That is what makes our country great.  Every single person has this opportunity to bring something innovative and new to the table and build a successful enterprise.  However, there are a lot of people who are not willing to put it all on the line.

There are certain risks that we have no control over which scare people away from seizing the opportunity to go "all in".  We sometimes get caught up in thinking:  What happens if I go all in then my building burns down?  What if I hire the wrong person who steals money out of my company and sabotages the organization?  What if someone sues me because I did something wrong or didn't perform my work perfectly? What if my products are no good and cause damage to someone of something?  What if an earthquake or other natural disaster puts me out of business?

Fortunately, there are insurance answers for these questions.  This is why we buy insurance.  Sometimes after several years of running a successful business and never having to deal with something going wrong, we start to think that we are somewhat invincible and that all those things we worried about when we started the business are no longer a threat to us.  So we start to cut back on our insurance spending, commit to larger deductibles that we may or may not be able to meet, and shop our policies so competitively that we take the value of a quality agent out of the picture because we no longer need someone looking out for us.  All of a sudden, we just want the lowest premiums attached to somewhat decent service so we can get our insurance certificates to the people that request them.  When was the last time you sat down with your insurance agent and discussed every business exposure you could think of and looked at insurance options before deciding to retain those risks or transfer them to an insurer?  When you let a new agent work on your insurance, are you looking for a lower price on the same product or are you looking for what they can bring to the table as far as advice, knowledge, and superior service?

If you are "all in" with your business as many people are these days, let's get back to the basics.  Let's make sure you are properly insured.  Let's make sure you know what your exposures are and what options you have.  Let's make sure you know what risks you can and can't afford to retain.  Let's make sure you are getting the knowledge and advice you deserve from your insurance agent.  Please give me a call if you feel like it would be valuable to you to have an in-depth discussion on protecting your business assets and liabilities.  If you are a client of mine, let’s spend a little extra time this next year discussing your options as we always do but taking some time to brainstorm and think about the things we might have missed or haven’t discussed before.  I would encourage everyone to go “all in” because that is where success is found; but don’t do it without knowing what your uncontrollable risks are and creating a plan to protect yourself.

For several years now the Insurance Industry has been pushing through a Soft Market.  Cycles of growth and decline exist within every industry.  In the Insurance world, the soft market is a period marked by low premiums, shrinking profits, high capital base, and fierce competition.  For now, we are not seeing any indication of entering into a Hard Market which normally follows.  From the Insurance Journal, "Abundant capacity coupled with diminished demand keeps downward pressure on rates.  As things now stand, insurance buyers can anticipate another year of favorable insurance prices, although catastrophe claims are always a wild card in the pricing cycle."  A widescale catastrophe can cause underwriting standards to become more rigid which causes premiums and profits to increase while competition loosens.

So what can a soft insurance market do for you?  The soft market is a very beneficial time for consumers because it is ideal for finding the lowest rates and best coverage on most lines of insurance.  This means that now is a great time to be buying insurance!  I faithfully market every client's insurance program about 90 days ahead of renewal time because I realize there is alot of competition out there between agents and also insurance companies and now is a good time to find lower rates and better coverage for you!  The recession has drawn out the soft market and will likely continue to do so as far as I can see.   

I hope this is a beneficial brief look for you of the Insurance industry.  Some agents complain about diminishing volume, heavy competition, and losing business.  I however see this as a great opportunity to save my clients some money and improve their insurance program; and when the market turns I will continue to do my best at saving money for my clients while finding the best coverage available in the marketplace.  Because of these fluctuations, I would rarely if ever allow my clients insurance policy to renew without approaching several markets to be sure we are getting competitive rates and coverage.   

"There are worse things in life than death.  Have you ever spent an evening with an Insurance Agent?" 
-Woody Allen

The above quote is a common misperception of how people view Insurance Agents.  I thought I would take a minute to address my recent poll results.  Hopefully the next one will produce more response.  The question was asked.. What are insurance agents likely to be doing when not at work?  Unless you know some insurance agents personally it would be hard to say.  Let me give my quick insight into the personal life of an insurance agent:

I was introduced to the insurance business by my father who works in my same office right across the hall.  If you were to ask most insurance agents why or how they got into this type of work they would very likely tell you that it was a family member.  My grandfather started an insurance agency in Ogden, Utah which is run today by my uncle.  My father started with them and eventually was offered another opportunity and decided to join another agency.  We now have several generations of insurance agents working in the area.  I was never pressured into following my father's footsteps into this industry.  I think the things that appealed to me were the opportunities to make a good living, the flexibility of an open work schedule, the good people in the business, and the ability to work with and get to know people across all industries and organizations.  Now that you have some background info on me, what is the answer to the poll question?  Obviously, there is no correct answer.  I was looking to gather info on a perception more than anything. 

I have been able to meet alot of insurance agents by being involved in the industry.  My father has spent the past 25 years or so serving on various boards and committes of the Independent Insurance Agents and Brokers of America and has just completed his year as the National President of this organization.  Being involved with this locally and traveling with my father has allowed me to meet alot of people in the industry.  In general, these are very good people who although they spend time on the golf course can usually be found reading through policies and contracts, serving in a community or industry organization, and taking classes to further their knowledge.  Every Trusted Choice Agent makes a pledge of commitments to their clients which you can read here http://bit.ly/bEQN5V. 

It's true, insurance isnt the most interesting or attractive industry in the world.  But actually, most insurance agents don't get into the industry because they love insurance.  They get into the industry because they are usually very diverse people that like to be involved with many different things.  For me, the long and competitive hours of prospecting and presenting are generally rewarded with an afternoon of golf or a couple hours in the mountains or on the lake.  The late nights of reviewing a contract or returning emails allow us to take a vacation with the family and be there with our children when they have a baseball game.  I also enjoy the Exchange Club and other organizations I participate in that allow me to be involved with my community and give back to those who I can help.  Yes, we spend long hours studying insurance concepts and forms but in the end it turns out to be a very good job with many benefits.  I love insurance because it allows me to meet and work with many outstanding people and gives me the freedom to do the things that I want to do, whatever those things may be.

Here is a good short article about insurance pricing from the Council of Insurance Agents and Brokers.  It is definitely a buyers market right now with pricing being driven down by fierce competition in the industry.  We are seeing unprecedented drops in premiums tied to increased coverage.  Because of this, I am careful to select 5-7 insurance markets for each of my accounts so I can find the best combination of coverage and pricing for my customers.  I can't guarantee that there isnt a lower price out there somewhere, because it would be impossible to cover every market.  However, I feel that I am doing my job by approaching a good number of companies for each account so we know that our pricing is competitive among the top insurers for each industry.  In this type of market, buyers have to be aware that there are insurance companies out there that are trying to buy business by offering extremely low rates.  Some of these companies are dangerous to do business with because they have likely cut out portions of coverage or they might be financially unstable and trying to collect whatever premium they can because they know there are people out there who will choose them solely based on price.  Sooner or later the market will turn and pricing will start to tighten up and maybe increase.  When that happens, you will find much more value in having a relationship with an insurance broker who understands the coverage forms and rates and can negotiate a good product.

COUNCIL SURVEY SHOWS COMMERCIAL PROPERTY/CASUALTY RATES
MELTING IN SUMMER HEAT WASHINGTON, D.C., July 19, 2010
"It’s the same old story," said Council President Ken A. Crerar. "Carriers continue to fight aggressively for new business as capacity flows into the market. It’s like someone forgot to turn off the spigot. No one seems to know when the reservoir will dry up, but in the meantime, it’s definitely a buyers’ market."
Commercial renewal pricing for small, medium and large business accounts continued to decline in the second quarter, compared with the first quarter of the year. Large account rate declines were again slightly more than the other accounts, but pricing for all account sizes was soft, according to The Council’s survey data. All individual commercial lines included in the survey experienced rate decreases, compared with the previous quarter. – Excess capacity chasing market share in the commercial property/casualty marketplace has resulted in another quarter of declining renewal pricing, according to The Council of Insurance Agents & Brokers’ second quarter Commercial P/C Market Index Survey. On average, renewal rates dropped by about 6 percent in the second quarter, compared with a 5 percent decrease in the first quarter of 2010.  Brokers across the country reported that capacity was plentiful for all lines:
"New carriers continue to enter the marketplace, further driving rates down. The capacity seems endless at this point."
"Carriers have lots of capacity for new business, but also don’t want to lose renewals. If there’s competition they will lower price."
"Appetite for premium is at a desperate level. New capacity continues to come into the market (inexplicably) and there is not enough premium to feed all the mouths."
"There is an abundance of capacity for D&O and other management liability coverage. Carriers are seeking to maintain market share by cutting premium and expanding coverage."
Buyers found good deals not only on pricing last quarter, but on terms and conditions as well, according to survey comments. "Carriers are open to improving deductibles, terms and conditions in hopes of being able to keep premium flat," said one respondent. Another broker saw "lower deductibles, broader coverage terms, more liberal terms." Still another remarked that there are "generally broader terms, no additional restrictions in coverage."
There was no notable change in customer demand for insurance in the second quarter, the brokers said. Only 26 percent of those surveyed said demand was up – about the same response as in the first quarter.
The economy and credit crisis remain the top concern of brokers across the country.

“It’s better to pay small liability claims out-of-pocket rather than report them to the insurance carrier.”

“Statute does not require me to have workers’ compensation, thus you (a higher tier contractor) can’t require it either.”

“I pay him with a 1099. He’s an independent contractor, not an employee.”

“If a workers’ compensation injury is less than a certain amount, I do not have to report it to the insurance company.”

“Flood insurance is only for those in ‘flood zones.’

“If I don’t have anything, they can’t get blood out of a turnip.”

“There is no need to purchase liability limits higher than my net worth.”

“That’s why I buy insurance (no need to implement risk management or loss controls).”

“Corporate status will protect me from liability, I’ll just declare bankruptcy and shut down.”

“Insurance is all the same.”

For more info on these myths read the article here....http://www.mynewmarkets.com/articles/103193/insurance-lies-clients-believe-and-pass-on-to-others

Found this kindof funny! Want to insure those cigars? Think again...

A Charlotte lawyer purchased a box of costly cigars and insured them against flood, storm damage and, of all things, fire. Needless to say, his investment went up in (happily inhaled) smoke within a month, after which the lawyer filed a claim with his homeowners insurance company that he was owed compensation because "the cigars were lost in a series of small fires". The insurer refused to pay, assuming (correctly) that the man had smoked the pack himself. A judge ruled, however, that since the insurer had never stated what was considered to be "unacceptable" fire the company did, in fact, owe him $15,000 to replace his property.
The insurance company paid the claim, but they got their own back in the end. The lawyer was then arrested, sentenced to 24 months in jail and a $24,000 fine for 24 counts of arson and insurance fraud. (as told at www.swapmeetdave.com)

Ain't life grand?

Here are a few common terms used in insurance that have us saying "What the heck does that mean!?" I will occasionally post new terms. If you have one that you are wondering about, let me know and I will give it my best.

1> Actual Cash Value: This means that your damaged or destroyed property will be replaced at it's current value: Cost new - Depreciation. If you want your property valued at what you paid for it, then you should consider purchasing insurance at Replacement Cost.

2> Coinsurance: In Property insurance, a coinsurance clause requires the policyholder to insure their property to a percentage of it's actual value. If the percentage to value is not met then there can be a penalty paid by the insured at the time of a loss.

3> Deductible: The amount that the insured must pay before insurance will pay anything.

4> Reinsurance: Insurance that an Insurance Company buys to protect itself from paying out catastrophic claims. Who are the Reinsurers of your Insurance Company? That is considered when assigning a financial rating to an insurer. If your Insurance Company does not use solid Reinsurers then you run the risk of their inability to pay out on a large claim.

5> Umbrella Policy: Provides coverage for losses that go beyond the limit of underlying insurance policies such as your Liability and Auto Limits. The Umbrella policy sometimes provides broader coverage and may cover something that is excluded from your primary limits. In this case, a Self Insured Retention would apply which is similar to a deductible.