Suddenly, Coverage Became Important!

Author: Chris Boggs

Insurance carriers spend in excess of $6.7 billion on advertising. Progressive alone spends over $1 billion.

Most of this advertising is about price and how much the insured can save. Only a few companies and a few ads ever bother to mention coverage and the need for protection.

Such an incredible marketing effort combined with several other industry failings create the idea that insurance is all about price. Even some producers think it’s about price. After all, every policy is the same except for price – right!

No, not every policy is the same. Big I Virtual University’s Ask An Expert service exists primarily because insurance is about COVERAGE not price. Hundreds of questions are and have been asked by agents trying to get a better understanding of coverage differences AFTER the loss has occurred and the insurance carrier has denied the claim – often correclty in accordance with the policy terms.

Suddenly, coverage became important!

Beginning around January 21, 2020, the US was welcomed into the worldwide COVID-19 fraternity. The first cases showed up in a nursing home in Washington State, eventually spreading across the country. Somehwere around mid-March cities, counties and ultimately states began issuing strict stay-at-home orders. By the first week of April, 42 states had instituted such orders.

Businesses closed because of these orders. Almost as soon as they began to close, they began to file lawsuits against their insurance carriers for denying business income claims. Big I has written many articles detailing why the denials were correct; following are links to a few:

• How Business Income Responds to COVID-19 in Under 975 Words
  
• Coronavirus: Does Business Income Respond?
  
• Coronavirus: Business Income Losses and a Covered Cause of Loss
• COVID-19: Extended Business Income Coverage
• Unwrapping Gregory Packaging: Proving No Business Income Coverage for COVID-19 Closures

Regardless whether these coverage denials are correct or not, suddenly, coverage became important. As these suits play out, the entire industry will learn that insurance policies are not all created equally, suddenly, coverage will become important.

Insureds purchase insurance coverage for one purpose – to have coverage when something bad happens. The agent’s job is to understand coverage.

Notice, what isn’t necessarily required of the agent. Agents are not generally required to address every possible exposure, but they are required to understand and know the differences in policy language and coverage provided by the various policies.

Words in a contract matter; and two contracts intended to cover the same exposure may be very different in key aspects. Coverage for food delivery is a key example. ISO’s personal auto policy (PAP) does not exclude food delivery because it is not public or livery conveyance. However, some PAP carriers don’t use unaltered ISO language, choosing to insert a specific food delivery exclusion. These differences are detailed in the article, Does the PAP Cover Food Delivery?

Suddenly, coverage becomes important.

Don’t wait for bad stuff to happen before paying attention to coverage. Coverage should be the primary concern from the beginning – far ahead of price.

We asked VU faculty members to offer their advice on coverage, including some of their personal stories detailing what happened to them when they didn’t pay attention to coverage. Take a look at what this group can teach us.

• “There’s no right price for the wrong coverage.”
  

• “My first year in the business I took over an agency personal auto account. On his way home from work the insured was hit head on by a drunk driver with no insurance. My suffered permanent brain damage. I had $500,000 CSL in liability coverage but only $100,000 in Uninsured Motorist coverage. After two years of therapy the insured was able to go back to work but he was never the same. I felt so bad for this family, I learned the hard way how important coverage is.”
  
• “After the loss, everyone picks up the insurance policy and starts reading. Price is not the top priority when the customer needs coverage most.”
  
  
• “In the insurance world many producers and underwriters have never read the full policy. So, they tell others their “understanding” rather than the reality. Much inaccurate information is spread this way. The vaccine for that infection is to read the full policy yourself. That way the infection will not cause you an E&O disaster.”
  
• “Seldom is ‘selling primarily by price’ the individual producer’s fault – it is almost always the agency principal’s responsibility. I have seen way too many principals push a new producer out to sell right after the poor neophyte just got a license. That makes him or her legal but dangerous.”
  
• “I have never had an insured complain about their premium while they are being paid by the insurance company for a covered loss.”
  
• “Quality sells but communicating a quality product is a more difficult task than selling price.”
  
• “When your education’s finished, you’re finished.”
  
• “Read the Policy. You can’t sell a product you don’t understand. You can’t distinguish between available products unless you understand the important differences between them.”
  
• “Nobody wants to pay for coverage, but they want it when they need it. Not only are agents creating E&O exposures by quoting price, they are giving up a lot of income.”

Coverage has always been important. It should not become important AFTER the loss. My hope when all this is over is that coverage will be of primary importance to agents AND consumers. Let’s kick price to the back of the line.

Last Updated: May 22, 2020