Ah, November. Football, winter is a comin’ and, of course, Thanksgiving!
And when your clients give thanks, do you think it’s for their homes or HO-3s? Is it for their cars or their PAPs? Is it for Angry Birds or that ARM processor? Although I’m well aware there are serious guitar players out there who would beg to differ, when I think of the first time I heard Cream’s "Crossroads," it is Eric Clapton’s playing I cherish, not whether he was hoisting a Les Paul or a Stratocaster.
Some might call this, and not necessarily as a compliment, "style over substance." I’ll take it a step further: Let’s call it "lifestyle."
Why? Because folks may disagree on the terms, but when making choices as to what is truly worthy of giving thanks, and what just is, it all comes down to "life"; as in, "get a life" or "live the life" or, in the words of Mr. Sinatra, "That’s Life!"
Related: Read Chris Amrhein's previous column, "Three Lessons Learned."
If you aren’t sure what this has to do with insurance, let me ask: When it comes to your daily efforts to provide valued coverage, do you want to be thanked or tolerated? Are you insuring your clients’ lifestyles or substance?
For example, consider one "substance" found in the ISO standard HO-3 policy: Coverage D—Loss of Use. A solid and valuable coverage. Yet where is it written that when Moses came down from the mountain, somewhere on those stone tablets was a note that the only proper limit for Coverage D was 20 percent of Coverage A? Oh, sure; theoretically if someone lived in a more valuable house, he would automatically get more Coverage D, but who came up with the idea that 20 percent was somehow the perfect amount? And even if it is for most, where is it written, "Verily, verily, I say unto ye, blessed be the one size that fits all"?
Back in the day, those of us familiar with the fallout from Hurricane Andrew may recall an interesting problem faced by some of the carriers in adjusting Coverage D losses in Miami. Simply put, some of those folks who lived in really nice homes might not want to spend the days, weeks or months it took to repair the damage in a local budget motel or FEMA-supplied tent. Any of you who watch "Burn Notice" or "CSI: Miami" know what some of those million-dollar homes look like. If that was your idea of a normal residence, would it surprise you that more than a few of those high-living folks decided perhaps a temporary home in the Fontainebleau or Breakers was a closer match for their lifestyle?
Related: Read another Amrhein column, "Back to School Blues."
In reality, that’s exactly what they did. Now, how do you think they reacted when their prized homeowner carriers said either (a) they would not approve anything close to the expense of those places; or (b) go ahead and move into the Boca Raton Club, but prepare for us to quit paying after 2 or 3 months, even though your house won’t be ready for a year. I clearly remember one carrier that specialized in the high-end market decided prior to Andrew a great marketing idea would be to take the cap off of Coverage D—in effect, let it operate much as business income does in a standard BOP. Later, one of the carrier’s field folks sorrowfully moaned to me that the carrier paid more from Coverage D claims alone than the total paid under the rest of the policy provisions. "Boy, were we stupid."
Let me get this straight. The same policy feature that has its "high-end" clients singing its praises is what he considers a huge mistake? As goes the famous line from "Cool Hand Luke," "What we have here is a failure to communicate."
In other words, this carrier, evidently via the mistaken assumption Florida was either immune from major hurricanes or that folks who bought millionaire mansions would happily stay at a Cheap Inn for 8 months, had to totally screw this up to get it right?
I suggest part of your risk management toolkit should be a discussion with every prospect and client on the issue of "post-claim lifestyle." For those folks who want Additional Living Expense to actually cover their ideas of "living" for the duration of repairs, decide what that might take and adjust Coverage D limits accordingly. For some, that 20 percent may be just fine. For others, overkill. But for quite a few, it will be a drop in the bucket. For them, according to the ISO Personal Line Manual, increasing Coverage D requires no endorsement, just an entry on the dec page and appropriate additional premium charged. Forget this "one size fits all" mentality; if it’s a joke in clothing, it’s a travesty in protection.
Related: Read the column, "The Obvious Choice," by Chris Amrhein.
And don’t stop with Coverage D. Once you get your risk management/providing proper coverage advice brain in "lifestyle" mode, opportunities abound to move your personal lines services up your client’s "giving thanks for" list. May I suggest just two?
- Transportation expense in personal auto. ISO’s standard PAP provides up to $20 per day, $600 maximum to get your client in another car when his insured vehicle is out of service for covered reasons. Think again of those "high-enders." You think they live in a Biscayne Bay haven once owned by a BeeGee and drive a clunker? If your choice of lifestyle considers a Lexus borderline slumming, do you seriously think you’ll consider your PAP great coverage when the adjuster tells you the only options are any car on that rental lot you can get for $20 a day? "Oh, feel free to upgrade, but it’s on your own dime." That old expression actually summarizes their resulting attitudes pretty well—they need insurance that pays dollars and you sold them coverage that pays dimes. The good news is ISO provides an endorsement to increase this coverage: PP 03 02, Optional Limits Transportation Expenses coverage. The bad news? The manual only offers increased limits up to $50/1,500, which still may fall far short of your client’s preferred protection.
- Water damage in basements. I wrote specifically on this issue last year ("Oh, the Places We Swim," September 2010) after issues arose during the big Chicago rains of that summer. At that time the only ISO endorsement that properly responded to the damage resulting largely from failure of sump pumps was the HO 04 95 01 09, Water Back-Up and Sump Discharge of Overflow. The good news was the endorsement filled a gap between NFIP flood coverage and the typical HO water damage exclusions. The bad news was the amount of coverage provided by the endorsement was a fixed $5,000—better than nothing, but likely far too little for many folks who had turned previous basement storage areas into "man caves" and electronic game rooms for the family. Well, friends, ISO has responded—a bit. Under the new HO 2011 program, ISO introduced a revised endorsement: HO 04 95 05 11, Limited Water Back-Up and Sump Discharge of Overflow Coverage. The "limited" comes from a change in water damage coverage other than from sumps, but the good news is the endorsement now offers limits up to $25,000. Far better, although I still know a few folks whose "man caves" alone could blow past that amount on the fly.
There are myriad more possibilities (other structures, watercraft, deductible amounts jump to mind) where coverage needs suggested by personal lines lifestyles may vary considerably from what "comes in the box." For all those who moan that our industry has come down to price, price, price, may I suggest moving the discussion from "same coverage, better price" to "lifestyle" coverage blows that whole "commodity" trip out of the water? And don’t think these issues are limited to personal lines. There also are businesses who don’t consider themselves to be plain vanilla. Why should their coverages act as if they were?
My late stepfather was a classically trained French chef. He used to say it wasn’t a well-cooked steak that made a great meal; it was where, how and with whom you ate the steak. If he’d been a musician, he might have said it isn’t the instrument, it’s the skill of the player.
So this November, start giving your clients and prospects reasons to give thanks for you. Think lifestyle, not coverage forms, and in your client’s eyes you may just be the banquet instead of the turkey.
