Chris Amrhein, AAI, is an insurance educator and speaker with more than 30 years in the industry. He also is the chief fun officer at insuranceisfun.com, and author of "Yes Virginia, There is Insurance." He serves as AA&B's Policy Issues columnist.
One of the joys of fall is seeing the harvest come in from those fruit and vegetable gardens that you labored over so loyally all summer. The time and trouble pays off when you realize, as you savor that incredible “fresh from the garden” flavor, what those who purchase edibles from the grocery store are missing. They think all produce tastes exactly the same, rather than appreciating the vast variety available for the feast.
Too bad that same blandness is often mistaken for the reality of insurance. Commodity? You must be kidding. Aren’t all forms fairly standardized now, with little variation? Hasn’t the sheer commonality of package coverages rendered the entire buying decision down to price—oh, and service, of course?
That’s about as accurate a picture of insurance market reality as seeing a photo of a tie-dye while listening to a Zeppelin MP3 recreates the ‘60s.
Related: Read "Misplaced Terminology"
As for “standardized” common forms and coverages, I am willing to admit there was once a time when those of us in the insurance education realm used to love major ISO program revisions. New homeowners program? Rent the van, print the handouts and sing out with Willie Nelson: "On the road again, just can't wait to get on the road again!"
After all, back in the day, an ISO filing had the power of Holy Writ. State approved with an effective date of May 1? Then you darn well better be ready on May 1 to know the new forms, coverage changes and rating implications, because on that day all old forms passed away and the new rolled in like that New Year's baby taking over from the old guy. Any new or renewal policy taking effect on or after that date would be issued with the new forms, for good or ill. So education folks leaped into that window of opportunity. Every practitioner of the insurance arts needed the new info and they needed it now. Instructors, start your seminars!
Of course, insurance publishers also greeted the new filings like Christmas come early. Authoritative articles needed to be written, textbooks updated, license and designation exams revised. A good, thick ISO forms revision was the insurance equivalent of the Federal Reserve launching another stimulus program: cash in now before everything reverts to normal.
How the mighty have fallen. Due largely to antitrust allegations in the early ‘80s, ISO is no longer the king of the hill but merely an "advisory organization." It was as if someone found a new translation and proclaimed the Ten Commandments as the Ten Suggestions: nice ideas, but feel free to ignore and/or delay if for any reason they were to unreasonably impact your operations. An ISO filing today has all the legal weight to an insurance carrier of a committee report.
Related: Read "Walk the Line"
Yet the old ways die hard. Following the tried-and- true advertising motto of "Well, if it ain't true, act like it is," publishers, education providers and others dreaming of the potential windfall cash-flow of the old days still treat a new ISO program rollout like a "must see, must act, must know" event—when in reality it's more of a "interesting, wonder if it matters?" sideshow.
“So what?” you may be asking. Isn’t it better for everyone if no single monolithic organization dictates the standard form language applicable to all? For good or ill, at least we are all on the same page, all can learn the same lessons and at claim time all will know what will and won’t be paid.
Clearly you didn’t live in the good old pre-‘80s, grasshopper. As much as it may rock your worldview, even then we had disputed claims, hard/soft markets and adjusters from the dark side who insisted that seemingly clear phrase was actually more of an opinion, not necessarily hard coverage fact.
If that was true then, what of now, when a smorgasbord of form/endorsement language is upon us, proprietary mixed with “standard,” and approval date by the applicable state regulator simply means carriers will now think about utilizing the new language when it’s convenient?
A recent email query highlighted the potential created by our current “ISO as advisory only” scenario.
As with any major HO revision, the ISO 2011 form update had its share of good news and bad news. For example, I would include under "good" a cleanup of the lawnmower liability coverage for occasional off-premises use; under "bad" was a "change from nowhere" severely limiting coverage for property in mini-warehouses. As stated previously, seminars were rolled out, articles written and tests/texts updated, all treating the new changes as "immediate, need to know" information.
Yet the reality appears to be quite different. Here we are, 2 years after this supposedly major revision rolled out into our insurance world, and I receive an email from an agent. His question was simple: Does he need to worry about the mini-warehouse change when it appears few if any carriers in his state have adopted the new program?
Having learned never to assume that what I see in the marketplace is necessarily absolute truth, when receiving questions of this type I always run it by a few of my friends with agency experience or national teaching gigs to test the waters.
Perhaps one quote from an experienced agent/instructor summarizes my findings the best: “It seems as though most of my companies only file new homeowners policy forms every 10 years or so and none of my carriers have adopted the latest ISO form. “
Yes, friends. ISO's major HO revision of 2011, approved in most states that year, has, as breathlessly promised through various educational channels, immediately impacted the marketplace, coverage and claims—not.
I feel so used.
But having been in insurance for more than 3 weeks, my compatriot knew well enough to include a disclaimer: “That's not to say that they haven't adopted some of the 2011 changes in a recently filed amendatory endorsement or in their own proprietary policy form.”
Related: Read "Tailor or Seller?"
In other words, when it comes to taking an authoritative stance, should full knowledge of the new ISO HO program be considered mandatory or as an interesting committee report to keep in mind for a later date? Although many prefer the former, reality indicates the latter.
Consider just a few of the implications:
- All insurance classes, textbooks and technical articles should bear the following disclaimer: "WARNING: Nothing contained herein regarding ISO form language and usage should be interpreted as valid and applicable now or in the immediate future. Please consult your carriers and/or competition for the latest effective status."
- No broad-brush summaries of coverage should be provided to prospects and insureds without the following disclaimer: "WARNING: Nothing contained herein should be construed as true. Please see your actual policy for actual coverages and details."
- All blog posts, tweets and web articles discussing actual coverage should include the following disclaimer: "WARNING: This content is for general information purposes only. Do not assume reading this will help you in any way, shape or form to actually understand what your current insurance will or will not do in an actual claim situation. Only your specific policy can be relied upon for valid information on your current protection, assuming you can make any sense out of the wording in the first place."
Bottom line: if you want the right coverage, you better look only at the specific, applicable forms in current force for a specific client or carrier. Any other specific coverage information, regardless of source, should be considered generalizations and opinions, not fact—and certainly not to be acted upon as if it were fact.
Add in the coverage changes, like many of those affecting Additional Insureds under the 2013 ISO CGL program revisions, that will only be clear after perhaps years of ISO revision, carrier modification and court interpretation. With apologies to Ronald Reagan, the need to verify, not trust, becomes even more critical.
Now is the time to establish regular communications with your carriers. After any ISO forms revision, ask:
- What, if any, of the new forms/endorsements will the carrier be adopting?
- Will those adoptions be the actual ISO forms or carrier versions?
- If carrier versions, how much or how little of the ISO changes will be incorporated?
- If either full ISO forms adoption or issuing of new carrier forms will take place in the future, will any of those changes be included sooner in state amendatory endorsements?
- If so, which?
- How do we obtain actual copies or new/revised forms wording that the carrier will be adopting so we can view the original sacred texts, not just rely on perhaps inaccurate summaries?
I don't mean this to sound negative. This is not a call to put your agency up for sale or flee for your E&O lives. No, this is what I call a classic "trap or treat" scenario. It's a “trap” if you fail to verify reality versus theory. But it's a major “treat” if you realize that the more complex the possibilities, the more value an astute and erudite professional offers to clients and prospects. Insurance a commodity? I think not! For my money, this evolving, fluid coverage marketplace is more accurately appreciated as the fields being white unto harvest!
Good harvesting, my friends!