Oftentimes, we speak on little nuggets of insurance policy language while
missing the boulders of information right in front of us. So, today I am going
to write about some of "the insurance basics" that, in my opinion,
need to be addressed.
Why discuss insurance basics in an agriculture insurance column? Well, the
other day, a colleague and I were speaking about what new classes we were in
the process of developing for the coming year. We were tossing back and forth
ideas about this new cyber class, a broadening discussion on the sharing
economy, looking at pollution from a different vantage point … all sorts of
ideas that we were pretty certain are going to be in demand from our current
client list as well as attractive to new potential clients.
Then we received an email request from one of our current clients that
completely floored us. As we were in discussion with that person about the
classes we were going to provide later in the year, he asked for a class on
"how deductibles work." This is a large national brokerage firm that
was asking for something so basic … or is it really so basic? Perhaps a review
of insurance fundamentals is in order.
The Named Insured
What do you do when you first engage a prospect and start your process of
determining what level of risk they want to accept? You've spoken about
what is important to them, how they would recover if a loss were to occur to a
certain piece of equipment or to a particular building, what would they do if,
while spraying their crops, an overspray situation happened … you know, all the
cool stuff. Then you are faced with one of the most important questions that
you need to get right, or all else does not matter—WHO is the insured?
While not earth shattering, it is one of the most important items that we
need to get correct, or, truly, all else will not matter. Why? Because, in farm
coverage (and many other) forms, we see language that says: "Throughout
this coverage form the words 'you' and 'your' refer to the
Named Insured shown in the Declarations." If we do not get the named
insured correct, all else is lost.
Questions To Ask
Be sure to ask the following questions.
- Who holds the title to the property in question?
- Is that person/entity the sole owner of the property?
- Do any others have a financial interest in the property that needs to be
protected?
- Has the property ever been owned in a different manner?
- Has the owner operated under any other names, partnerships, joint
ventures, etc.?
This list could go on and on, but you get the gist of it. Note: Do
not just ask for their current policy and copy down what the prior agent has
put down. Dig deeper, be thorough, and cover all the bases.
It is actually pretty simple. Getting the named insured correct is the first
step in having the potential for coverage to apply. If it is not, you may be
facing some terrifically entertaining errors and omissions discussions.
The ACORD 401
You may not refer to the Association for Cooperative Operations Research and
Development (ACORD) Agriculture Application as the ACORD 401, or you may.
Regardless, it is one of the first tools agents/brokers have at their disposal
to make a great first impression on their underwriter. A completed ACORD
app can be a thing of beauty. Alas, so few are complete that beauty is
often proverbially "in the eye of the beholder."
You see, I view the job of an agent/broker as this: to use the written word
and make the potential insured/risk come alive for the underwriter. Those who
do this well will find that their submissions do the following.
- Are dealt with in a more timely manner than others
- Receive better offerings and terms
- Have greater accessibility to the underwriters
- Have better discussions and negotiations with underwriters
- Have an easier time getting to "yes" rather than getting to
"no" with underwriters
- Make more sales because they have better overall offerings
About midway on the first page of the ACORD 401 is an area that states:
"Describe Farm/Ranch Operations and Any Incidental Business
Activities." The operative word here is "describe."
Some of you know that I am privileged enough to speak at the Emmett J
Vaughan Agribusiness Conference that IRMI holds in various locations
nationwide. When I am in those classroom settings, I am surrounded by some
terrific insurance professionals: marketing, claims, underwriters, customer
service, account managers, and producers—all of these and more show up in those
classrooms. So, I have been able to ask underwriters across the nation the
following simple questions.
- What is the shortest "description" they have ever seen in that
ACORD 401 field?
- How do they feel and respond when they get that brief descriptor?
Their answers? "Farm" is "not very helpful." Then we all
have a good laugh. But think about that for a moment. If your idea of a
description of your insured's operations on a farm ACORD application is to
describe it as a "farm," you're basically insulting the
underwriter. This is the first opportunity to brag to the underwriter about the
terrific, one-of-a-kind, well-managed, risk averse farming operation that they
have seen all day—or perhaps all week. Don't blow this opportunity.
At the very least—and I do mean at the very least—it's important to fill
out that box on the app with all sorts of descriptive information about the
farm's operations. Preferably, put the words "please see attached
narrative of the insured's operations and activities." In addition to
that simple approach, photographs (or better yet videos) of the insured's
operations go a very long way in assisting the deskbound underwriter in
understanding the totality of the prospect's operations. Don't leave it
to your underwriter and Google Earth. Bad first impressions can be difficult to
overcome. Positive first impressions of a risk lead to favorable considerations
going forward.
If you don't care enough about your insured to provide a solid and
professional submission, why should your underwriter care enough to go out of
the way to help you in writing the risk? And, if you do not know about the
risk, then how can the underwriter feel good about doing their best work on
your behalf as you have not given them enough information to adequately do
their job!
Control the initial message. Show the risk in the most favorable light. Pay
attention to the small yet significant details that can assist ourselves in
getting to "yes" with the underwriter with the most favorable
terms.
More on insurance basics in another article.