Zurich's Home Service Plan picks up where
homeowners insurance leaves off
By Elisabeth Boone, CPCU
Joseph Melendez is president of Zurich Home Services.
Picture this: After years of saving for a down payment, followed by months of househunting, you've found your dream home. As you and your family unpack treasures and arrange furniture, you can't stop grinning. You've arrived! This house is not only beautiful, it's perfect. And you were afraid you'd be stuck in that rental house forever, with the temperamental air conditioner and the prehistoric oven and the hot water heater that cut out just as you were lathering up in the shower. Not to mention the nosy landlord, who was always just "dropping by" so you perennially felt like you'd been caught in the commission of some foul crime.
"So long to all that," you say smugly to yourself ... and then, in search of a snack, you meander into your state-of-the-art kitchen with the professional-quality range and built-in refrigerator, the pride of your new castle. You open the refrigerator door and realize that, far from arctic, the interior of this modern marvel is, well, tepid. You look down and, with mounting horror, you see a small lake forming around the base of the refrigerator ... and your sneakers.
You yell for your spouse, throw towels on the mess, and the two of you begin a room-to-room search for the folder of warranty information the previous owners were kind enough to leave you. "This thing's gotta still be under warranty," your spouse mutters darkly. "After all, a built-in refrigerator ... it wasn't installed in 1952, right?"
"Right," you chirp, with somewhat less confidence than your tone of voice implies.
At last you locate the crisp manila folder neatly labeled "Appliance Warranties." You frantically rifle through it ... range, microwave, washer, dryer ... ah, here it is: the warranty for by far the most expensive appliance you ever thought you'd own--the built-in refrigerator. After skimming over the seemingly endless "whereases" and "heretofores," you get to the nitty gritty ... and, sad to say, it's pretty gritty. What it says in effect is, "Sorry, folks, but this thing's out of warranty."
Feeling your enthusiasm for home ownership begin to fade, you stare at each other across the offending warranty. "Well, it must be covered by our homeowners policy," you say. "Let's call Larry and find out how soon the insurance company can get us a check."
Could this happen to you? Of course--except that, as an experienced independent agent, you know this kind of loss definitely is not covered by your homeowners policy. Could it happen to your clients? Of course--and how will they react when they call you to report a loss and you have to say, "Sorry, folks ..."?
Keeping clients happy
Whether your clients are first-time homeowners on a tight budget, empty nesters downsizing to a smaller house, or affluent world travelers with a housekeeping staff, you don't want to find yourself in the position of having to deliver this kind of unwelcome news. And in today's homeowners insurance market, with rate hikes sending a lot of people on shopping trips, it's more important than ever to keep your clients satisfied.
One way to accomplish that is with the Zurich Home Service Plan, which helps homeowners deal with the unexpected costs of major appliance and system breakdowns. Introduced to independent agents at the IIAA InfoExchange in Hawaii late last year, the Home Service Plan is designed to close the gap between homeowners insurance and manufacturers' warranties.
"In today's challenging homeowners market, independent agents need a way to retain their clients and protect themselves against the rate shopping aspect of homeowners insurance," says Joe Melendez, president of Zurich Home Services. "The Zurich Home Service Plan is a value-added policy that helps independent agents differentiate themselves from order takers. An agent can say to a client, 'For years I've been protecting your biggest asset--your house--against fire and storm damage, as well as liability claims. Now I can take care of mechanical systems and appliances inside your house."
The Zurich Home Service Plan is modeled on a successful product offered by the exclusive agents of Farmers Insurance, Zurich's sister company. As the 100% reinsurer of the Farmers plan and similar programs available through other distribution channels, Zurich acquired a solid grasp of how this kind of protection works.
"In 2000, we decided we wanted to be in the business on a direct basis," Melendez explains. "We wanted to administer the business ourselves so we could control claims handling and ensure that customers would receive high-quality service. We also wanted to control distribution so we could work more effectively with our distribution channels to create products that would satisfy the marketplace."
The Zurich Home Service Plan is approved and available to independent agents in 30 states. "We continue to sell through our Farmers relationship as well as the Zurich Small Business Unit's agency distribution system," Melendez says. "We introduced our new independent agent program at the Big I, and it went live on December 1. This year we'll focus on enhancing the technology we've developed to get this business moving in the right direction."
Broad coverage, broad market
What does the Zurich Home Service Plan cover? Here's a list:
* Plumbing system
* Electrical system
* Heating system
* Central air conditioner/heat pump
* Water heater
* Primary kitchen refrigerator
* Stand-alone freezer
* Clothes washer and dryer or combination washer/dryer
* Oven, range, and cooktop
* Built-in microwave oven
* Built-in dishwasher
* Garbage disposal
* Trash compactor
* Garage door opener
Additional coverage is available for central air conditioning/heat pump, garbage disposal, trash compactor, stand-alone freezer, and garage door opener.
The Home Service Plan is offered in four core packages priced at $152, $256, $312, and $397, depending on the number of items covered. Surcharges apply to items like built-in refrigerators, which are more expensive to repair or replace than conventional refrigerators. For houses that are larger than 4,000 square feet, the insured pays $50 for each additional 1,000 square feet. Surcharges also apply to homes with oil boilers and oil-fired water heaters, which are commonly used on both coasts. There are few restrictions on the age or model of appliances or systems, and no home inspection is required. Premiums can be paid by Visa or MasterCard in one to four payments.
Service under the plan is provided by a network of nationally recognized experts that has hundreds of locations throughout the country. If a covered system or appliance breaks down, the insured pays a $50 service fee per claim and the item will be fixed or replaced with a new item of like features and efficiencies. Insureds can call the Zurich Home Service Plan custom care specialists toll free seven days a week, 24 hours a day.
With some 69 million households in the United States, Melendez notes, the market for the Zurich Home Service Plan is broad. The product is available to owners of single-family houses, condominiums, co-ops, and townhouses. "What we've found through market research is that there's really no 'sweet spot' in terms of market segments," Melendez says. "We've found that the product meets the needs of people at various stages of life, with different family structures and income levels. A young couple buying their first home may be on a restricted budget and may worry about having to deal with the unexpected cost of an appliance or a system breaking down. People in their 30s and 40s, with a double income and kids, may value the product for its convenience. People who have been living in their house for 10 years or more may purchase the plan because they realize their systems and appliances are aging. Seniors are good prospects because they may be on a fixed income, and also because they may fear being taken advantage of by repair people they don't know. And a very affluent homeowner whose house may be worth $20 million or $30 million, and who travels frequently, may purchase the plan for the convenience of the housekeeping staff, who would have to deal with any problem that arose with a system or an appliance."
A winner for agents
As pointed out earlier, no agent wants to be the bearer of bad tidings to valued clients who have sustained a loss that's not covered by their homeowners policy. "A heating or air conditioning system can cost several thousand dollars to replace," Melendez says. "With the Zurich Home Service Plan, the insured's out-of-pocket cost is just $50. If you tell your client he or she can have a new heating system for $50, don't you think that client will be interested?"
The success of the Farmers home service plan, called Farmers Homeowners Plus, is a strong indication of the results independent agents can expect with the Zurich Home Service Plan, Melendez asserts. "The top-producing Farmers agents all tell me the same story: 'I call a customer and say, "I'm looking at your homeowners policy, Jim, and you know what-your air conditioning, heating, plumbing, and electrical systems aren't covered, and neither are your appliances. I have a new product that covers all those items. Would you like to know more?" ' Making the sale is easy because the value proposition is so strong."
When Zurich introduced the Home Service Plan to independent agents at the Big I meeting, the reception was very positive, Melendez says, and this year the insurer plans to promote the product aggressively to independent agents. "We plan to offer incentives to agents, and we'll support them with advertising campaigns in the trade journals. We think this product can do very well in the independent agency channel, and we think it's very competitive from a pricing standpoint," he says. "The annual premium for the Home Service Plan is on a par with a homeowners premium, so insureds can cover their entire home for $800 to $900 a year. To most people, that's more than reasonable."
Because Zurich itself is a commercial lines insurer and writes no personal lines, it offers the Home Service Plan to independent agents on a brokerage basis. "This is a stand-alone product," Melendez says. "The agent doesn't have to have any relationship with Zurich at all. The agent simply goes to our Web site and registers, and we treat each submission as a piece of brokered business. Agents can also call a toll-free number if they have questions or need help."
The independent agent Web site is a full-service site, Melendez continues. "You register, get a user ID, and then you can go into the site and find out about the product. You can get sample forms, sample solicitation letters, and supporting marketing materials. We'll issue the policy on your behalf. You can process applications and payments online, and you can also manage your customer base. This is a full-function interactive Web site that enables agents to process their business efficiently."
Today more than ever, Americans place a high value on security and peace of mind. By protecting homeowners against the cost and inconvenience of appliance or system breakdowns, the Zurich Home Service Plan goes a long way in the right direction. *
For more information:
Zurich Home Service Plan
Web site: http://homeservice.zurichus.com