 |
 |
 |
|
Safe at home Hartford Steam Boiler product, offered through other carriers, covers an array of home systems By Elisabeth Boone, CPCU Bigger, pricier, more sophisticated—all of these descriptors apply to the houses being built today, and also to the systems and equipment that are needed to keep the occupants comfortable. Even for the owners of modest dwellings, the cost of replacing central air conditioning or heating can run well into the thousands of dollars. And Murphy’s Law tells us that if a system is going to break down, it’s more likely to happen just before tax time or right after all the holiday credit card bills come due. That’s the bad news. The good news is that independent agents and brokers now can offer their insureds a product that expands their homeowners coverage to protect against equipment breakdown. Called Homeowner Equipment Breakdown (HEBD), the product was developed by The Hartford Steam Boiler Inspection and Insurance Company (HSB), the acknowledged leader in commercial equipment breakdown coverage. HEBD is designed to complement the homeowners policies written by traditional personal lines insurers. Homeowner Equipment Breakdown is the latest in a series of what HSB calls “strategic integrated products”—coverages and services that are designed to complement policies written by other insurers. One such partnership, with The Hartford Financial Services Group, was featured in an article on page 108 in the March 2006 issue of Rough Notes (“Identity Theft Becomes a Hot Topic among Business Owners”). To learn more about HSB’s strategic integrated product initiative, and about the new Homeowner Equipment Breakdown coverage, Rough Notes spoke with Michael Fusselbaugh, HSB’s senior vice president for strategic business development. Fusselbaugh is a 33-year veteran of Hartford Steam Boiler. His broad background encompasses underwriting, marketing, regional management, human resources administration, and international operations. He serves on the boards of the Institute for Home Safety and the Insurance Education Institute, and works with the American Insurance Association’s international committee, the International Association of Engineering Insurers, and the National Association of Mutual Insurance Companies. HSB’s strategic integrated product approach, Fusselbaugh explains, has its roots in the reinsurance relationships HSB began to build with other carriers more than 40 years ago. In fact, he notes, some 80% of HSB’s U.S. business is generated by working with other carriers on this basis. “That is a model that has evolved over time,” he says. “We started in the reinsurance business in 1963, helping companies complement their small commercial package policies by including what was then known as boiler and machinery insurance. We established relationships with companies and basically became their boiler and machinery department. “We work with large national carriers, regional companies, mutual companies, and even a few direct writers,” Fusselbaugh continues. “We also work with MGAs and E&S companies, and we have some programs with pools. Any place an insured goes to purchase property and fire coverages, there’s an opportunity for HSB to complement those with equipment protection.” Working with more than 200 insurance company clients around the world, HSB provides not only reinsurance capacity but also a menu of services that includes product development, forms and filings, underwriting and pricing, marketing and training, risk management, claims management, systems support, accounting support, and project management. Using a process it calls Client Integration, HSB works with the carrier to help it develop a new line of specialty coverage. “Our model is all about helping that company enhance its model and service its agents and their insureds,” Fusselbaugh declares. “During the process of getting involved with these 200-plus companies, we were frequently asked to help them solve other important business needs. That helped us develop the concept for the strategic integrated products we have today.” Complex exposures As the leading writer of commercial equipment breakdown coverage, HSB is ideally positioned to develop protection for the systems found in personal residences. Given the complexity of today’s home equipment, Fusselbaugh says, “It clearly requires an engineering touch to understand it and to deal with contractors when equipment is being replaced. About half of our company’s employees are engineers, so they bring expertise that isn’t available elsewhere.” In explaining the equipment HEBD is designed to cover, Fusselbaugh says, “Every residential insured has electricity, heat, air conditioning, and hot water. We call these core systems ‘the heart of the home.’” Over the years, he says, “We have seen that the costs of replacing these core systems have been increasing significantly, as well as the labor costs involved. The basic homeowners policy has exclusions for mechanical breakdown as well as wear and tear, and those exclusions create gaps that our new coverage is intended to help fill.” In designing HEBD, Fusselbaugh says, “We wanted to focus on the built-in equipment that is part of the home’s infrastructure, rather than every single electronic device that you can have in a house.” Freestanding appliances like stoves and refrigerators aren’t covered, he notes, “but if the kitchen has a center island with a cooktop built in, that would be covered.” HSB’s Homeowner Equipment Breakdown product is available to the owners of single-family homes, condominiums, and townhouses. Regular maintenance is not covered under HEBD, Fusselbaugh says, and generally such work costs less than the typical homeowners deductible of $500 to $1,000. “However, if a gasket or other part that has been gradually wearing out ultimately leads to the breakdown of an air conditioning or heating unit or an electrical system, that’s the kind of claim we would pay under this coverage. If a boiler or furnace broke down and water escaped as a result, homeowners property coverage would pay for the water damage, but not the equipment. Now, the insured can have both covered under one deductible. “The HEBD deductible usually follows the property deductible the insured has already selected,” Fusselbaugh explains. “This helps us control both claims costs and loss adjustment expenses, both of which ultimately add to the cost of the product.” HEBD also provides coverage for loss of use that results from the breakdown of an insured home system. “If your air conditioning unit breaks down during hot weather, we’ll pay the cost of moving your family to a hotel while repairs are being made,” Fusselbaugh says. In the event of a covered loss, the insured calls his or her agent, who reports the loss to the homeowners carrier. That carrier in turn contacts HSB, which assigns a claims specialist to investigate the claim, then deals with the contractor and insured to expedite repair or replacement of the damaged equipment. The settlement check is issued by the homeowners insurer, and the insured may not even be aware of HSB’s involvement. Everybody wins Thus far, eight insurers are offering the Homeowner Equipment Breakdown product to clients through their independent agents and brokers. About 20 more carriers, Fusselbaugh says, are considering making HEBD available to their policyholders, and many more companies are expressing interest. “As with every new idea within a company, the timing has to be right,” he says. He sees the potential for significant expansion of the HEBD concept as more insurers understand the need for the product as well as the marketing opportunity it represents. “As we talk to the claims departments of the homeowners carriers we work with, we find that they’re excited that HEBD fills the equipment breakdown gap,” Fusselbaugh says. “It puts the claims person writing the check in a better position because he’s paying more, and it puts the agent in a better position because he can tell the insured that more of his claim is going to be covered. As consumers, we all have personal experience with home equipment breakdown issues, and it’s exciting to help insurance companies develop solutions they didn’t think were possible.” * For more information: |
|
|||||||||||||||||
| ||||||||||||||||||
