Identifying key areas where your
quotes may differ for your clients’ benefit
Taking the time to properly review and discuss proposed limits,
deductibles, and discounts shows your prospects that you are
willing to take the time to understand their exposures and address them accordingly.
By Marc McNulty, CIC, CRM
I recently had a conversation with one of our personal lines account managers and the subject turned to quotes from our competitors. More specifically, the topic concerned times when we are competing against others for the same piece of personal lines business.
We agreed that some producers—often those who lack sufficient experience—will go straight to the premium information and will base their level of concern on that information alone. “That only tells part of the story,” she remarked. “There’s a lot more that goes into it.”
I couldn’t agree more. Price is only part of the equation.
Those of us who have been in the industry for a while know that if you sell strictly on price, you’ll eventually lose on price. Yes, the out-of-pocket premium exposure is the first thing that many individuals consider, but your savvy prospects and clients will recognize that there are hidden costs associated with deductible differences and/or insufficient coverage.
Our goal this month is to identify some of the key areas where your quotes may differ from your competitors—and where you can use your knowledge to sell personal coverage that better addresses the customers’ exposure.
We’ll start with some of the homeowners insurance key areas.
What perils are covered?
Yes, this may seem silly, but I recently saw a competitor’s quote that clearly showed that a home was quoted on a “Form 3,” yet I saw no additional endorsements listed in the additional coverages section to expand the perils. That means that quote would be the equivalent of an HO 00 05. While this may not seem like a major issue on the surface, it can have big ramifications.
As a refresher, the Form 3—or HO 00 03—has named perils for covered contents. If the cause of loss isn’t one of those named perils, then coverage doesn’t exist. This could leave the insured on the hook for a sizeable out-of-pocket cost in the event of an accident or mishap that isn’t covered.
Enhanced and guaranteed replacement cost
Again, this may seem trivial, but there is undoubtedly a difference between a homeowners quote that doesn’t include an enhanced replacement cost endorsement and one that includes a 25% enhanced replacement cost option, a 50% option, or even guaranteed replacement cost coverage.
I’ve yet to see a total loss that didn’t need an enhanced replacement cost endorsement to appropriately cover the cost to rebuild the home as it was prior to the loss, so it’s to your advantage to provide as much cushion as possible. Offering your clients 50% enhanced replacement cost (or guaranteed replacement cost where available) will provide them with peace of mind that doesn’t cost much more from a premium perspective.
Percentage deductibles
As we explored in our most recent “Mind the Gap” column, percentage deductibles are becoming increasingly prevalent for losses caused by wind or hail. For a homeowner with a $500,000 Coverage A limit, there are significant differences between a $2,500 flat deductible, a 1% wind/hail deductible, and a 2% wind/hail deductible.
Let’s take this a step further and examine another coverage that is typically subject to a percentage deductible but is often overlooked in many parts of the country: earthquake.
We often see this coverage offered at a 5% or 10% deductible, so be sure to explain the difference to your prospects. In addition, you may find that a masonry veneer exclusion applies on some earthquake options, so this is once again something that is easy to gloss over but could have a substantial financial impact for the insured.
Undamaged roofing or siding
This coverage is one that has gone hand-in-hand with the industry’s revisions regarding how wind/hail claims are addressed. Many carriers are now offering the option to purchase additional limits of insurance for roofing or siding that is undamaged yet needs to be replaced to match materials that were damaged by wind or hail and are subject to replacement.
This coverage helps to combat issues where clients get frustrated because laws dictate, for example, that only line-of-sight roofing needs to be replaced when an entire roof is not damaged by wind or hail.
The limits offered can vary greatly, so take the time to speak with your prospect about this and in turn offer them a limit that makes sense.
Water backup of sewers and drains
Again, this coverage can be overlooked in certain regions, but in others it is a critical endorsement that provides protection for homes with finished basements or lower levels. While it seems that many agents are starting to do a better job of offering higher limits—at least in my part of the country—I’ll occasionally see an inadequate limit offered.
In those instances, it may be an oversight or may have been intentionally done to save premium but, either way, use this to your advantage when possible. Stress that the cost to simply dry out and repair a finished lower level can quickly erode this insurance limit before damaged contents are even considered so, once again, offer some extra cushion if you can.
Auto options
While you will find most of the coverage and deductible differences on homeowners quotes, don’t forget about the auto.
Split limits are not the same as combined single limits, so make sure your prospect understands the difference. This is also a good time to suggest a personal umbrella since you can work multi-car accidents into the conversation and explain how they can quickly erode auto limits.
Ensure your quotes have adequate limits for rental reimbursement. Low limits that are automatically included with auto quotes are woefully insufficient and won’t come close to putting your insureds into comparable rides while their vehicles are being repaired. Use $40 or $50 per day as a minimum and discuss with your prospect if this limit needs increased. Again, this is one of those areas that can snowball and create an extra expense for your insured if they don’t have enough coverage while their vehicle is being repaired for three or four weeks.
Don’t forget discounts
Don’t forget to confirm appropriate discounts are being offered on your home as well as your auto quotes. Ask about alarm systems, automatic water shutoff systems, backup generators, or any other protective devices that can provide premium savings.
Similarly, if your prospect is interested in telematics, advise them how it works and how it offers potential premium savings.
Taking the time to properly review and discuss proposed limits, deductibles, and discounts shows your prospects that you are willing to take the time to understand their exposures and address them accordingly. This allows you to de-commoditize the process and in turn gives you an opportunity to explain how proper protection can potentially save the insured a lot of money in unforeseen costs should the unthinkable occur.
The author
Marc McNulty, CIC, CRM, is a principal at The Uhl Agency in Dayton, Ohio, and has been with the agency since 2001. He divides his time among sales, marketing, technology and operational duties. You can reach Marc at marcmcnulty@uhlagency.com.
