It all started with a simple observation. A group of friends are sitting in a small town cafe, enjoying a delicious lunch, when one notices something interesting about the table settings.
"Did anyone else notice that some of the tables are set with blue glasses, and some clear? I wonder why?"
Immediately everyone starts looking about the cafe, and, indeed, the reality is just as she stated.
Then began the varied attempts to answer her second query: Why?
Please note at this point no one really has a clue, but that didn't stop the plethora of possibilities from soon becoming a flurry of confident assertions. "Oh, I bet the clear glasses are for water, and the blue are for iced tea." "No, I believe the blue are the reserved tables and the clear those open for walk-ins." "I'm pretty sure the waitresses set their own tables, and some probably just prefer the blue." "It's because we are the last ones here for lunch. They close for an hour to get ready for the dinner shift, and the blue are the more formal glasses they are putting out for dinner after using the clear for lunch." And on it went.
Being naturally inquisitive (a trait I have always considered an asset despite my mother regularly pronouncing it a curse), I decided rather than simply appreciating a typical conversation designed more for social interaction than actual accuracy, I would find out the true answer. Walking over to the counter where the owner was rearranging the supplies for the dinner crowd, I asked her the significance of the blue versus clear glass phenomenon.
A look crossed her face I can only describe as sheer disgust. "I love those blue glasses!" she exclaimed. "And just four months ago I ordered 15 cases of them. It's only taken the oafs around here that long to break a third of them."
Mystery solved. The reason for the clear glasses? Not enough blue ones.
Hardly the stuff of Agatha Christie and Hercule Poirot, but actually the most obvious answer. Anyone who has ever worked in a restaurant knows an inevitable result of constantly handling large amounts of dinnerware other than paper plates is significant loss due to breakage.
Yet humans often seem hardwired to ignore the obvious in favor of the more intriguing or more complex answer. Whether it is a search for more excitement in an otherwise dull-seeming life or the mere fact it's more fun, otherwise reasonable people seem to prefer conspiracies to what appear simple events: Oswald couldn't have acted alone, the whole moon walk was faked on a soundstage in Vegas, and Bill Gates sold his soul to Satan in exchange for the source code for Windows. (Okay, so that last one is true, but you get the idea.)
Clearly it is not only casual lunch conversation that can quickly veer into uncharted waters when the obvious is ignored in favor of the more interesting. What I would like to suggest is this same tendency infects too many agents and carriers. While possibly innocent in mere conversation, it is resulting in real risk to too many insureds.
Three examples:
- Personal. For decades, the question has remained the same. Why do so few homeowners carry flood coverage? For that same length of time, NFIP has churned out studies stating the clear fact that a huge percentage (25 to 30 percent) of flood claims occur in non-high hazard flood zones. Yet agents evidently persist in either assuming a flood will never happen in such areas (clearly wrong) or that if it does happen, any home currently above sea level will remain unaffected (clearly wrong). Add to this that the vast majority of homeowners living in high hazard flood zones only carry flood as long as their banks force them to, and one wonders just what homeowners' coverage agents are selling these folks beyond the standard forms? Obvious answer, based upon long-time studies of account development? Nothing.
So no matter what homeowner issues may or may not be on your selling radar these days, may I suggest you add the simple mention of flood insurance to all prospects and clients? Feel free to accompany your offer with recent video from just about everywhere in the country not currently under severe drought conditions, and perhaps some will be inspired to add flood to their protection programs. And one additional value-add: Don't forget to ensure they also consider water backup and sump overflow coverage, to fill the gap between what NFIP and the standard homeowners forms will provide.
- Commercial. This one is way too obvious, particularly for students in my seminars. Let me state it thusly. What is the No. 1 reason people start a business? (To make money.) What, then, would be the No. 1 disaster that could befall their business? (To lose their ability to make money.) Is there some form of insurance protection that is specifically intended to provide protection for their income, if that income disaster is due to an insurable peril? (Drum roll, please.)
Survey said? Business income!
For any life/health agents in the audience, I will add overhead disability and key man to the menu. But for the P&C among us, the amazingly aptly named business income coverage forms would appear to anyone, except clearly those in our line of work, to be the No. 1 most preferred and wanted coverage on our palette. Yet it is consistently overlooked. And even when taught in class, the emphasis is often on the bells and whistles of coinsurance, difficulty in calculating precise amounts needed, or sometimes obtuse endorsements.
Permit me to recall an old life insurance teacher who, when confronted by his class of eager young practitioners endlessly querying him about cash values, interest rates and whole life versus term issues, finally ended the free-for-all with this unassailable truth: "Folks, it may seem unbelievable to you, but at the time of a man's death, no widow or child will care about all your geegaws and thingamajigs. There will be only two questions that count: First, did he have any life insurance? And only if that answer is 'yes' will they then ask how much? While I hope you will all strive to provide the best possible product and service to your clients, never forget: the worst life insurance policy, if in force at time of death, is better than none."
With very little modification, may I suggest the same answer is true for business income?
Personal and commercial. I was recently at a conference where there was a 3-hour breakout on CGL policy triggers. Another 3-hour session was devoted exclusively to certificates, yet another on cyber liability and another on EPLI. All interesting, all good subjects. And yet, when considering the veritable potpourri of potential liability issues confronting our clients, may I once again suggest we are overlooking the obvious elephant in the room
Simply put, almost any typical insured, if actually sued, will find his 21st century suit being addressed with 20th century limits.
Thirty years ago television game show fans were riveted by the drama of the $10,000 pyramid, aghast at $1.00 per pack cigarettes, and appalled that the average major league baseball player was making $50,000.
Today $10,000 would be the take-home consolation prize, cigarette prices run as high as $9 per pack, and that average salary is over $3 million. And folks are now used to those large numbers. We routinely drive by billboards proclaiming this week's mega lottery prize is $12 million dollars, and what are we thinking? "I'm not wasting my time or a buck on that. I'm waiting till we are talking real money—$40 million at least." Folks in Congress assert that proposals suggesting only $500 million in cuts are just games, not serious efforts.
The insurance parallel? Thirty years ago I was selling homeowners' policies with $300,000 limits of liability, and BOPs with $1 million. We offered personal umbrellas of $1 million to $2 million and commercial umbrellas of $1 million to $5 million. If we use even half of those multiples of increase for game shows and baseball salaries, shouldn't a common liability limit for today's clients be nearing at least $5 million on the homeowners' and $50 million on the BOP, with commensurate increases in those umbrellas? Yet today's most common limits are not multiples of, but nearly identical to, those of 30 years ago.
The obvious liability answer? Set aside all the bells and whistles; what we really need is some serious discussion with our insureds about the inadequacy of their current limits. Begin with a realistic assumption based upon current claims amounts in their industry. And forget about averages—in liability, the discussion must always be about the worst-case scenario. For example, does anyone seriously think a parent whose child is crippled by a dangerous condition at even a small motel is only going to sue for $1 million? Do you believe any attorney seriously trying to make a living will be willing to file a suit for that amount? Regardless of the actual sum awarded, those parents and their attorney are going to ask for millions, and a jury that considers a $12 million lottery offering unworthy of a $1 ticket is likely to have the same view when determining awards.
Hey, I'm as big a fan of coverage detail as the next geek. But when it comes to the real questions of risk management and coverage needs, set aside the trivial pursuit and grab that low-hanging fruit. As that restaurant owner understood so well, people may love to debate colors and appearances, but on a scorching summer day a customer wanting iced tea reduces the preferences and style to a much simple equation: glass mandatory, color optional.
Obviously.
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