Remember, your clients don’t need to be millionaires to be sued like one
Personal umbrellas. Those of us in the insurance business know about them. Many of us probably own one. And, if we sell insurance or help personal lines clients manage risk, we know the important protection role they can play.
But there’s a disconnect somewhere.
“Most consumers have never even heard of an umbrella,” explains Daina Kawchack Smith, chief marketing officer at PersonalUmbrella.com.“Agentsare really great at selling home and auto policies, but umbrellas don’t come up as much. If agents do talk about them, customers may view them assuperfluous—an unnecessary expense—because they’re not required by law, a mortgage-holder or a lienholder.”
“Agency leaders need to educate producers and CSR teams about the importance of umbrella policies in protecting not only the insured, first and foremost, but also the agency.”
-Daina Kawchack Smith
Chief Marketing Officer
“A large majority of people who have achieved considerable financial success come to us, and they don’t havean umbrella,” says Dale Krupowicz, CAPI, chief operating officer and partnerat Personal Risk Management Solutions, a New York City personal lines agency that serves high-net-worth clients; it was also the Rough Notes Agency of the Month in April 2014. “It’s very surprising. Other people come to us with limits that are probably too low.” She estimates that 70% of new clients come from direct writers.
“Some agents and CSRs, especially new ones, can be uncomfortable proposing umbrellas, because they themselves don’t fully understand their value. Some think they’re difficult to underwrite or time-consuming to process,” Smith adds. “And sometimes they think the insured needs to lead a certain lifestyle, have a certain amount of assets, have a certain job title or profession to need a personal umbrella policy.”
Despite the challenges, there are good reasons to offer the coverage. First, they provide needed protection. “New clients sometimes come to the table thinking, ‘I’m a responsible person and I treat others well. What are the odds that I will be sued? And how much is at risk?’” observes Celia Santana, president and CEO at Personal Risk Management Solutions. “This is an area where clients need to be educated. They need to understand the risks they face.” And agents need to help make sure they’re protected.
Legal defense is another reason. “Defense is costly—especially for umbrella claims, because they’re typically more complicated,” Smith explains. “There’s no question you’ll need a skilled and specialized attorney. With a covered umbrella policy loss, insureds generally won’t have to find or pay for legal counsel. It comes standard with most umbrella policies. And with most carriers, including ours,legal defense is paid outside the limit. So insureds aren’t reducing their coverage.”
Holding on to customers is another reason to offer the coverage. “Statistics show if you have the home and auto and then write that third policy, the umbrella, retention is much higher,” explains Steve Brooks, CIC, CPIA, president of B&B Premier Insurance Solutions in Agoura Hills, California. “To help make that happen, we pay our agents and account managers cross-sell commissions for all umbrellas they sell.”
E&O protection is another reason to offer the product. “It’s important foremployees to understand that, by offer-ing this product, you really are protecting the agency from potential E&O claims,” says Smith, “and when you offer it, regardless of whether they buy it, be sure to document, document, document in the system that you’ve done so.”
Trends and issues
According to Brooks, personal umbrella coverages are largely unchanged. “One exception is more companies are offering higher limits of uninsured and underinsured motorist (UM-UIM) coverage on the umbrella,” he explains.
“Pricing has been very stable,” Brooks adds, “and we’re definitely finding that more and more people are receptive to umbrellas. We have a higher-net-worth clientele, so we sell a lot of them.”
Denise Lantz, personal lines manager at Baltimore-based Potomac Insurance Network, the June 2014 Rough Notes Agency of the Month, says coverage trends sometimes are driven by customer demographics. “Where there are high-value dwellings or autos, for instance, we’re seeing umbrella limits that are higher than the standard $1 million; most often, they’re in the $2 million to $4 million range,” she explains.
“Some agents are pushing the UM-UIM coverage, but that tends to be expensive,” Lantz adds. “So it is presented more often to the more affluent clients. That said, it’s important for agents to present and explain, in depth, umbrella policies both with and without the UM-UIM coverage. Once the client is aware of exactly what it covers, they can make the choice.”
Lantz says she’s seen situations where a client’s driving history can exclude them from coverage with some markets. “In response,” she notes, “carriers such as PersonalUmbrella.com often can provide umbrella coverage even in situations where a mainstream carrier declines.”
Brooks says PersonalUmbrella.comalso can cover certain non-personal risks. “With them, we can use the umbrella to protect rental properties—apartment buildings, for instance—and also some commercial auto,” he explains. “That makes it great for insureds that have these exposures.”
Making the case
Client education and awareness play important roles in building a personal umbrella business. Digital tools can help carry some of that load. “If there’s an article in the news that would relate to excess liability or an umbrella, we’ll share it with our followers on social media,” explains Krupowicz. “We also circulate such stories to our advisors; we continually are finding ways to educate our team.”
The agency communicates directly, too. “We just sent out a newsletter; the content appears on our website as part of our blog,” Krupowicz adds. “It talks about the summertime risks clients face, and many of them are liability risks an umbrella could help clients address—things like swimming pools, boating, entertaining in your house, and so on.”
Smith says she’s seen agents and CSRs share relevant local newspaper or online articles. “If there’s a local accident or other situation, they’ll share that—internally and with customers and prospects—and talk about insurance implications,” she explains.
She’s also seen agencies bring in part-time help—a student or intern, for example—to contact insureds via phone before renewals and invite them in to discuss coverages. “CSRs and agents could do this, of course, and many do, but they’re often busy with other things; having someone focused on setting appointments can help,” Smith explains. “The agency that has my insurance does that, and I love it.” Emails can be used to accomplish the same task.
Santana addresses the awareness focus like this: “It’s one of the most important areas where we can help clients,” she says. “As advisors, our goal is to help people prepare for a catastrophic situation, and getting sued could be very catastrophic.
“When we talk to people, we point out that suing people is a business,” she adds. “Somebody goes to the hospital, and there are personal injury attorneys waiting downstairs. They can buy information that tells them who was in an accident. They can come after you with very little effort. They’re very, very slick.
“People may think that, based on their lifestyle, how they treat others, and how responsible they are, they won’t be sued,” Santana notes. “Our job as advisors is to help them understand it’s not personal. If someone knows your address or what car you drive, they may figure they have a decent opportunity, if they sue you, to be paid.”
Smith agrees. “Some customers believe that having a million dollarpolicy means they need to live a certainlifestyle or have a certain job. Agents need to share with prospects and insureds: ‘You don’t need to be a millionaire to be sued like one. All you need to do is drive and work.’”
The overall goal—and the path to marketing success—is client education. “The client needs to be informed on what the coverage entails,” Lantz says. “For instance, although it can beexpensive, underinsured and uninsured motorist coverage under the umbrella should always be discussed—and offered. So many drivers have no insurance or state minimums, and this coverage can be very beneficial.
“Many clients I have spoken to did not realize this type of coverage was available, and some do decline because of cost,” she says. “But if an agent takes the time to explain the advantages of an umbrella policy in today’s world, clients will understand how beneficial it is, and many have no problem paying the additional amount.”
“My experience with umbrella sales is simple: Always quote and offer it to the client,” says Lantz. “Many clients I’ve worked with never heard of umbrella coverage. I’ve found that they appreciate when an agent takes the time to explain it, whether they purchase the policy or not.”
It’s not an uncommon approach. “We almost always only quote full packages, so we try to automatically quote an umbrella policy on every risk,” Brooks says. “When people see how inexpensive umbrellas are, many take one. Also, some companies offer auto and home discounts if customers buy the umbrella.”
His agency also pushes the UM-UIM coverages. “Not all companies offer that, so if we sell it, it becomes that much harder for an insured to leave us and for other agents to quote against us,” Brooks adds.
Smith points out that the cost of umbrella coverage has become more affordable over the years. “Even with the UM-UIM coverages, which I think are the most important, it can be very budget-friendly,” she says. “Agents with carriers that are charging higher rates should get quotes from other carriers to see what’s available.”
“We often suggest to clients that they consult with their financial advisor and personal attorney to determine what limit of coverage is right for them,” Santana explains. “Many of our customers come to us through one of these advisors, and we find they can help customers understand the value.”
The agency also builds an insurable assets profile for each client. But that’s not always the perfect way to decide umbrella limits. “That profile may not truly represent someone’s net worth,” Krupowicz notes. “Their other advisor likely has that information, and that’s a reason we refer them.”
“In 67% of the cases where we are being hired by a new client, they are purchasing a higher umbrella limit,” Santana adds. “We offer an umbrella to every new client, and on renewal each year, we ask if their limit needs to be revisited. We discuss a wide range of examples, like someone hurting themselves on their property or being involved in an auto accident with our client’s vehicle.”
She says certain types of individuals are more receptive to discussing limit adequacy. “Clients with newly licensed youthful operators, recently divorcing, or experiencing a wealth transfer—for instance, selling their company, experiencing a significant market-related financial gain, or coming into an inheritance—tend to be more motivated than others to get proper protection,” she notes.
According to Brooks, direct-bill PersonalUmbrella.com policy renewals automatically include quotes for higher limits. “The insured simply needs to check a box to raise their limits,” he explains. “This results in more premium, more commission, and added E&O protection.”
And don’t forget to talk about all exposures. “We tend to talk to prospects and clients about different optional coverages they can purchase under the umbrella—things like directors and officers, employment practices liability, increased uninsured motorists, and other protection that can go along with their umbrella,” Krupowicz notes.
Ready to sell
Lantz says, “I’ve found that, when agents explain umbrellas correctly and thoroughly, clients do find real worth in the product.” That’s why it’s important to make sure agents and others in the office know how to do so.
“Agency leaders need to educate producers and CSR teams about the importance of umbrella policies in protecting not only the insured, first and foremost, but also the agency,” Smith says. “By offering it, they help reduce the likelihood of future E&O claims.”
She recommends reaching out to carriers for materials to help team members learn and sell. “Ask about brochures and other resources that are geared toward helping the CSR or other employee talk to prospects and clients,” she recommends. “At least once a year, ask your marketing rep to give CSRs a presentation or webinar about umbrellas, to make sure that they know the product and are comfortable selling it.”
Also, she says, “Create an agency-wide protocol that calls for team members to consistently offer higher limits of liability on homeowners and auto products, and to offer a personal umbrella policy to every single insured, not on just new business, but also at renewal,” she suggests.
“Consider turnkey bi-annual marketing campaigns,” Smith adds. “Run a report on a book of business. For all auto or residential clients without anumbrella policy, send them an umbrella brochure or policy offer letter. Those with the coverage can be offered higher limits.”
Populate those campaigns with real-life examples. “We use a variety of things—information carriers provide us, information we find in the press—including accounts found in the court cases section of Rough Notes, which we find to be very interesting and useful—and our own experience,” Santana notes.
By Dave Willis, CPIA
For more information:
B&B Premier Insurance Solutions
Personal Risk Management Solutions
Potomac Insurance Network