25 Personal Risk Management Tips

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Personal Risk Management Tips

Personal lines consumers have a wealth of insurance products and options to choose from in the United States. Yet many of these policies contain myriad exclusions and resulting coverage gaps that can be difficult to find and to understand; these uncovered exposures are often not effectively communicated to insurance consumers. And these gaps, appearing after a loss occurs, may cause consumers undue financial burdens. In addition, these gaps can result in unwanted publicity for agents and insurers, which can ultimately harm the reputation of the property and casualty insurance industry if ignored.

Due to competitive pressures and a tendency to concentrate on commission-earning endeavors, personal lines agents have incentives to focus their attention on increasing insurance sales volume rather than providing good risk management advice to their clients. These coverage gaps illustrate the need for an important paradigm shift for personal lines insurers and agents alike, particularly for agents that have many wealthier clients with numerous and complex loss exposures. And this shift concerns the needs for agents to become their client’s risk manager. Thus, the personal lines risk manager should not only understand insurance coverages but also be familiar with other risk management techniques, such as risk control, risk avoidance, contractual risk transfer, and retention. For example, if a wealthy client is a board member of a nonprofit organization that refuses to procure directors and officers liability insurance, the agent may need to advise the client to avoid this risk if at all possible.

Forward-thinking insurers can assist agents in this risk management process by becoming aware of important coverage gaps. For example, providing broader policies or offering premium-bearing endorsements would be two possibilities to resolve the gaps. Also, arming underwriters and even marketing representatives with information for agents on the following risk management techniques is vital.

  • Risk avoidance
  • Risk control including loss prevention and loss reduction techniques
  • Contractual risk transfer, particularly when the insurer cannot provide the needed coverage

Insurers can become champions in this endeavor and gain a reputation (among the insurance agency and consumer community) for being problem solvers not only through the sale of expansive policies and additional endorsements but also through timely advice from underwriters and marketing reps to their agency force on a host of risk management techniques and solutions. On the same theme, agencies can gain a reputation among their community for being holistic risk managers, rather than insurance order takers.

In this practical paper, Robin Olson, a senior research analyst at IRMI, has prepared 25 personal risk management tips to help you achieve these goals.

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