SEVERAL questions have popped up on my e-mail radar lately, arguing for or against the idea of placing the coverages of a single account (either personal-lines or commercial) with multiple carriers. Judging from the questions and various arguments pro and con, I have to conclude a lot of folks (no doubt supported by carrier-marketing hype) still believe in the “magic bullet”: that one carrier, coverage form or policy always wins the day.

“Which is the right policy for this auto-related insured, a garage policy or CGL?”

“Isn't the DOC attached to a BAC a better coverage solution for family members than the extended coverage endorsement attached to the PAP?”

“A tenant should cover his lease-based assumption of risk for building damage under a single policy in which the landlord is named as an insured–right?–rather than have the landlord and tenant each cover it in separate policies.”

It seems agents always are searching for the “Holy Grail,” a simple, incontrovertible answer for all complex coverage questions. And in truth, there is such an answer. It cuts through the clutter and gets right to the heart of the matter. That answer is: It depends.

If that bothers you, consider my recent experience in the clothing world. It started with the good news that four guest singers were going to join our church's gospel quartet in a week of performances for our Christmas program. The bad news was that our director wanted us to dress in tuxedos.

Unlike those of you who regularly don the black tie for power banquets and hobnobbing with royalty, I've worn a tuxedo exactly five times in my life: for four weddings and a formal dinner. Each event required me to wear formal dress for just a day; therefore I rented tux on each occasion. Now, however, I would need a tuxedo for a full week, rendering the renting option ridiculous. I needed to buy.

I am not what one would call a “standard” size. Every measurable portion of my anatomy falls outside the parameters clothing makers rely on when creating the typical store-rack sizes. Like others of my ilk, I have learned to just make do with whatever comes closest to my measurements.

As I stood in the store, figuring out which tuxedo ensemble might approximate my correct size without jeopardizing the dashing appearance our choir director desired, a sales clerk approached.

“Find what you need?” he asked pleasantly.

“Just checking the sizes,” I replied.

“The one you're holding looks great to me. We also have some nice shirts on sale today. I'll be over by the register when you have everything you need.” Then he walked away, stranding me in a hell of lapels and cummerbunds.

I pressed on, trying out various coats. One size was a bit snug in the shoulders. Another fit adequately as long as I never had to button it. I had just about decided to go with the “buy it large, at least it will be comfortable” technique when a different salesperson approached.

“Need some help with the fit?” he asked.

After a bit of discussion about my fitting woes, he pulled a coat from the rack, told me to put it on and pulled out a tape measure. Within a few minutes, he had determined my sleeve length and neck circumference. He asked me how the tuxedo fit as I walked or raised my arms, and as I buttoned and unbuttoned the jacket. In some spots he marked the clothing with chalk, in others he stashed a few pins. He repeated the process with the pants.

“When do you need these?” was his last question.

“Next Monday,” I replied.

“Fine, we can do that,” he said. “Let me take the coat and pants with my markings and pins. You pick out anything else you need to go with these, and bring them to me over at the counter.”

Ten days later, I stood in from of a 28-foot Christmas tree with seven other folks, singing my heart out and looking good!

Just like finding well-fitting clothing, coming up with the proper coverage for some clients is relatively cut-and-dried. Many more of us, however, are subject to a myriad of variables and coverage considerations, yet are often stuffed into preformatted coverage forms and packages–usually for no other reason than that is what the agent sells everyone else. And just like us “odd-size” folks who thought we had to settle for what we could find on the clothing rack, those clients may not realize the value of an agent who knows how to properly tailor coverages. When they meet one, they learn how wondrous a customized fit is.

As in the clothing industry, events seem to have conspired against the tailors of the insurance world. In the last few years, some carriers have seemed determined to eliminate the insurance agent's value to clients. They didn't do this by writing coverage direct, cutting commissions or raising production quotas. Rather, they greatly expanded the eligibility and underwriting rules for package policies that threw in the proverbial kitchen sink in regard to coverages and limits.

Not many years ago, properly pre-paring a proposal and submission for Main Street accounts required a knowledge of the special multiperil policy. (Remember SMPs?) It took multiple tours through the commercial-lines manuals, where you'd search for coverages, proper codes, minimum premiums per line, increased limits factors and state modification factors.

Then along came a simplified, comprehensive coverage package that could be rated and underwritten from a card you could carry in your back pants pocket–the businessowners policy. Coverages that previously were unavailable or considered esoteric (unlimited business income for up to 12 months of interruption, for example) were now standard inclusions. Many agents thought they had died and gone to heaven. They raced throughout the countryside, “bopping” the multitudes in less time than it previously took to fully develop the rates for a single risk. Such agents can be forgiven for thinking a new era had arrived in which sales volume ruled over technical expertise and in which underwriting was soon to become an obsolete art. |

Imagine you are playing the home version of “Trivial Pursuit–Insurance Edition,” and the following question came up for your final pie slice: What did ISO do in the early 1980s that would profoundly affect how agents sold insurance for decades to come? Most probably would answer, “Introduce the claims-made CGL.” I would disagree. The ultimate paradigm-shifting event was ISO's massive expansion of the commercial property class-rate program. It was the insurance equivalent of having the Bible translated from Greek and Latin into the common tongues. Literally over-night (after the expiration of the for-those-days mandatory transition program, of course), thousands of prop- erty risks that previously had been ratable only after consulting voluminous rate pages were condensed into a few predefined rating categories. Whereas deciphering the abbreviations and codes of the specific rate cards once was a highly valued art practiced by insurance adepts, now mere mortals could easily arrive at “proper” rates without knowing anything beyond the most basic information. The barbarians were at the gates!

Yes, friends, the kingdom of insurance entered the “buy-off-the-rack” era, with all the drawbacks that connotes. Certainly, there are clients who can get a perfect fit by purchasing a BOP or other standard package policy. If so, fantastic! Unfortunately, such policies also can tempt agents to take the path of least resistance. The sloppy salesperson risks being thrown in with all the charlatans who insist a suit looks swell, no matter how bad the fit or style for a specific customer. The ethical tailor, on the other hand, is not going to lie to a client. But the wheat really separates from the chaff when that tailor also has the skill to perform alterations to turn an “adequate” article into one truly tailored to the unique needs of that client. The charlatan can but obfuscate, since all he knows is what he has to sell. He makes the client fit the clothing, whereas the tailor makes the clothing fit the client.

The best insurance practitioners are great tailors. They know their products and services intimately and recognize that each has inherent strengths and limitations. They have honed their skills and therefore have no fear of learning that certain clients fall outside common coverage or rating provisions. If a certain carrier or coverage fits a client perfectly, they go for it. But when unique needs arise, the bold and few take out that tape measure.

Chris Amrhein is an insurance educator and speaker with more than 30 years in the industry. He is also chief fun officer of www.insuranceisfun. com. Readers may contact Chris at chris@insuranceisfun.com.

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Policy Issues: Singing the praises of tailors in an off-the-rack world

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