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Posts Tagged ‘personal risk management’

It is my experience that most licensed insurance agents are usually able to answer their client’s coverage questions correctly.  Meanwhile, many problems arise simply because consumers simply do not know the right questions to ask to get the information they really need Should it be the consumer’s job to know the right questions to ask?

In reality, learning how to help their clients ask the right question is a skill that few insurance professionals ever master. As Hurricane Irene was chewing up the coast in NC this summer and heading north, our staff received numerous calls from clients asking “Am I covered for a hurricane?”. The question our clients really wanted answered:  “How will my coverage protect me for losses I may sustain from a hurricane?” Knowing this was what our clients really wanted to know, we were able to re-frame the question and provide a much more complete answer.

Of course, more complete answers can sometimes be disconcerting, especially when they are only being provided as a hurricane approaches.  Few consumers take comfort in being reminded, for example, that while a homeowner policy does provide quite a bit of coverage for damages caused by a hurricane, NO policy provides the mythical “full coverage” we’d all like to have.  The “Fine Print” of any policy explains in detail the damages that are and are not covered, and coverage varies widely among carriers.  Consider the following:

  • Unless you have specifically requested to purchase flood insurance, you will not be covered for losses that are caused by water that rises from the surface and enters your home by your homeowner policy.
  • Conversely, rain water that enters your home through a damaged roof or window is not a “flood”, and is covered by almost all homeowner policies.
  • Almost every homeowner policy in the NY Metropolitan area has two deductibles: one that applies to losses caused by a hurricane, and one that is applied to all other covered losses.  All consumers should know well in advance of a hurricane what their deductible will be for losses caused by a hurricane.
  • Because Hurricane Irene had been reduced to Tropical Storm status was when she reached NY, covered losses were adjusted using the (lower) deductible that applies to all other losses.  Next time we may not be so lucky….
  • Homeowner policies do not provide coverage to replace trees damaged by wind, hurricane force or not.  There is, however, limited coverage to remove downed trees, though policies vary widely on the circumstances under which this coverage is available, and how much coverage is provided.
  • For the many who lost power, can I suggest the purchase of (at the  least) a portable generator before next hurricane season?  Homeowner policies do provide limited coverage for food spoilage caused by a power outage, but by the time the deductible is subtracted from the claim, the cost of a portable generator would have been paid for and no spoilage would have occurred.

Two primary takeaways from all of this:

1. To make well informed decisions, insurance consumers need skillful guidance to ensure they are not only getting the right answers…. but also to the right questions.

2. It is just as important to examine the right questions BEFORE a risk arises.

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Think about the insurance advertisements you have recently seen on TV and in print. Most emphasize this flawed and glib message: the smart way to buy insurance is from the company providing you with the lowest cost. One carrier even encourages you to “name your own price.” To be sure, these are clever, entertaining, and persuasive pitches. Meanwhile, directing consumers to prize “low cost” above all other factors is irresponsible pandering that can result in huge problems after a loss.

Compounding this shell game advertising ploy by insurance carriers is the sad fact that many of those who know better — the agents and brokers who understand insurance and need to properly guide consumers — also slyly insert “save money now” as a theme in marketing their value proposition. One agency with a national footprint reduces the complex inter-relationship between price and insurance value with this gem: “We have yet to meet a person who is insensitive to insurance pricing.™” Yes, that is a trademark; proud of a keen ability to observe the obvious, this agent is apparently concerned other agents might actually steal this profundity (aspiring Mad Men be forewarned: we insurance folk sure know how to craft pithy advertising copy).

Instead of PRICE, look to focus on VALUE: To better convey the inter-relationship between pricing and insurance protection, here’s something to consider: insurance agents and brokers are insurance consumers as well, and while “not insensitive to insurance pricing”, we also know that “pricing” is just one of the factors to be considered when making an informed decision when buying insurance for ourselves. As a result, no insurance professional I know is overly sensitive to insurance pricing, since we understand the allure of low cost coverage entails some manner of sacrifice in protection and /or service. After all, does anyone believe the insurance carriers who are advertising “low cost” coverage are reducing their costs because they are more benevolent than other carriers? It is noteworthy that the insurance carrier that helps consumers “save 15% in 15 minutes” is also among the most profitable insurance carriers in the world. Rather than focus on price, my commitment is to help consumers better assess the value of insurance coverage. While doing so would make for a VERY boring advertisement, I am willing to be labeled boring by remaining an advocate of helping consumers to learn the more important questions to ask before buying insurance. For starters:
• What are the other factors besides price to consider when buying insurance?
• What inside information do insurance professionals use to help them buy insurance coverage that is both effective and cost efficient?
• What non insurance strategies do insurance professionals use to reduce the cost of insuring their risks?
Insurance pricing is important, but understanding the real value of the insurance being considered is much more important. Let me know if you or those you know would like the perspective of an insurance insider to discern between price and value.

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I wish to remind all consumers that developing a plan to effectively manage the risks of a stolen identity is a critical part of any personal risk management program. Where to start? First, a few words of caution on where not to start. Beware of the large number of organizations offering to sell “identify theft protection services” to individual consumers. (more…)

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PrivateRiskAdvisor
Perhaps it is the result of growing up in a household that regarded “Murphy’s Law” as gospel —- but I am almost manic in expecting (and preparing for) the unexpected.  While the “unexpected” does not occur to any of us with great frequency, when “it” does I am rarely caught off guard, or without a plan on how to address it (whatever it may be).  This “be prepared for the sky to fall” tendency has earned me many nicknames, none of which are ever intended as a compliment.  According to the online test “Are You a Worry Wart”, my score, while not off the charts, does suggest I am naturally inclined to help others at least consider preparing for the wide range of risks that those who are not “worry warts” are neither concenred about nor often even aware of.   You want me worried. You NEED me worried.

So my latest worry – for you, and all who you know – is what can happen to all of the data on your smartphone should your phone ever become stolen or misplaced.  Why this issue?  Because I not only recently lost my iPhone, but much worse, I had no plans in place to protect the data that was on it from mis-use.  I make this admission with great shame, and can assure all my friends and family are having great fun at my expense. While this blunder has cost me several nights sleep, I have learned from my mistake, and you can too.  Of course, you can also just resolve to never lose your smartphone (or have it stolen).  That did not occur to me….  

Although I did not know WHAT steps to take to secure the large amount of personal data on my phone (it had NO client info!!), I did know WHO to turn to for expert guidance.   I met Ondrej Krehel of Identity Theft 911 awhile ago through an introduction arranged by Chubb.  Krehel and his colleagues provide highly customized identity protection and data risk management solutions for a wide range of business and organizations.  Identity Theft 911 has a great website that features a “Knoweldge Center” full of valuable insights.  Of course, this firm can be of greatest assistance to the organizations they serve when they have the opportunity to provide their services before an intrusion occurs.  Similarly, while Krehel also authors a great blog full of helpful ideas, I only wish I had learned about how he can help me protect my data before I lost my iPhone

I encourage EVERYONE who has not lost a smartphone to review the “low tech” and “high tech” suggestions Krehel offers on what can be done to protect your data before it is ever lost or stolen.  Use this link to read “Your Smarter Smartphone” posted on Krehel’s blog, and be sure take the time to view his many other insightful posts.   Should you wish to learn more about Identity Theft 911 and the wide range of their capabilities, I’d be happy to arrange an introduction.

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I am happy to report I do not have any clients with homes in Japan. Meanwhile, several clients who I’ve spoken with the past few weeks were surprised to learn that all unendorsed homeowners insurance policies issued in the U.S. specifically exclude damage caused by, that’s right, earthquake, tsunami (flood) and damage from a nuclear facility. 

If the threat of any of any of these risks concerns you, there is good news: insurance protection from damages caused by earthquake and flood is readily available, and generally not very expensive (costs are much higher for those with homes located near a seismic fault or prone to flood waters). Please let me know if you’d like to understand the coverage options available to protect your property from earthquake or flood damage.

While I am unaware of any insurance carrier offering to sell coverage to protect against nuclear damage, the Price-Anderson Act, passed in 1957, is in place to compensate the public for property damage and injury caused by a commercial nuclear accident in the United States.  The program, renewed by Congress most recently in 2005, ensures that adequate funds are available to satisfy liability claims for property damage and personal injury sustained by the public. The program limits the liability of companies involved in certain nuclear activities, such as power plant operators, in order to encourage the development of private nuclear power. Currently, there is nearly $13 billion in liability insurance protection available to be used in the event of a commercial nuclear accident.  This program paid about $71 million to local residents and businesses impacted by the Three Mile Island accident in 1979.

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 Perhaps 95% of the consumers and professional advisors I meet with attempt to focus their discussion simply on the insurance policies they own.  Ours is a product focused culture, and our buying decisions are guided by products receiving 5 star reviews, Consumer’s Digest Best Buy recommendations, and / or finding a “good deal”.  The power of product advertising has robbed us of the ability to ask ourselves the larger questions.   Questions like “Why am I buying this product?”

Why buy insurance for your home?  Why buy insurance for your car?  When I ask these questions of my clients, I often receive an expression suggesting puzzlement, annoyance, or both.  To ease both emotions, I ask if the reason is to replace what they own in the event it were damaged or destroyed.  “Of course!” is the most common answer. 

Since the real reason to buy insurance is to replace what we own, why is “Save Money Now” the central theme in most insurance company advertising campaigns? Because advertisers have reminded insurance carriers that consumers respond best to “save money” offers.  To gain market share, they focus their ads on product, making save money the product.  Do consumers ever ask how the savings are being achieved?  Insurance carrier benevolence???  These campaigns are effective, and despite the “savings” provided to some consumers, these carriers earn a profit, content to sell products that often do not provide the desired protection.  All because no one ever asked “Why”.

Carl Richards, Contributor at New York Times Bucks Blog and the author of Behavior Gap, reminds us that in the financial services industry, consumer focus on product is exploited by those who are paid to sell product. Richards is well known for using illustrations that lend clarity to issues that many journalists do not understand. While the lesson of the illustration above is aimed at investors, it is just as relevant to those seeking the right way to protect their homes, cars and other assets from unforeseen loss. Richards explains: “Most of us are trained to think ‘What’ first, because it’s what you hear about all day long. It’s the message you read in financial publications and see on CNBC. But ‘What’ questions should come after we think about ‘Why’ and ‘How’ ….Starting with ‘Why’ means achieving clarity about your personal financial goals and creating a plan.” Thank you, Carl Richards, for reminding us that before we focus on the ‘what’ product solutions, we first need to start with asking ourselves the larger ‘Why’ questions. 

For more about Carl Richards work: http://www.behaviorgap.com/

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This video on You Tube is part of a series that shows in vivid detail the remarkably customer centric protection and world class service available to all who insure their home with Chubb and experience a loss.

The vast majority of those I speak with believe that insurance products are a commodity — able to be differentiated by price alone. Sophisticated consumers know better. Meanwhile, only those who are unfortunate enough to experience a truly large loss have a first hand chance to examine the actual “worth” of the coverage provided by their policy. For claimants fortunate enough to be insured by Chubb, the well chronicled ”Chubb Difference” becomes very apparent, and as you will see, very quickly. This video is eye opening for those who think “all insurance is the same”.

A question: what insurance carrier do you want handling your claim, or a claim for your best client? Watch the video, and send it to those who wrongly think “all insurance is the same”.  

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