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PF&M at a Glance Program meets needs of commercial niche markets
In 1999, Insurance Services Office, Inc. (ISO) introduced Market Segments (MS), designed to meet the unique needs of specific commercial niche markets. The program consists of an endorsement which wraps around an existing commercial policy, adding a package of coverages and other enhancements that are specific to the needs of an individual type of risk. Currently ISO offers the Market Segments program for 14 commercial niches, the most recent additions being apartment buildings (created in August 2005) and personal care (at the beginning of 2006). The others are: auto service risks; dry cleaning and laundry facilities; florists; hardware and home improvement stores; hotels, motels and inns; janitorial services; landscapers; plumbing and HVAC contractors; restaurants; self-storage facilities; staffing firms; and supermarkets. For many of these Market Segment niches, the coverage enhancements include cash and receivables type protection—such as money and securities, reward payment, money orders and counterfeit money, forgery, employee dishonesty and accounts receivable. Other common enhancements are computer equipment, debris removal and outdoor property. Any coverage part, form or endorsement that can be added to a package policy can be added to a Market Segment Division policy. However, before adding anything, it is important to review the coverages being provided by the MS endorsements. Remember that these endorsements have been designed to meet the needs of the particular market segment, so the coverage may already be provided within the endorsement. The Supplemental Schedule is an important part of the product since it provides a synopsis of the coverages provided within the package form. This may be an attractive selling feature since the positive aspects of the policy are listed in the front rather than being hidden within the pages of the policy forms. Each segment has very specific guidelines as to which fit and which do not. As an example, restaurants include delis, ice cream stores, and restaurants but not caterers, discos, nightclubs and some taverns. The supermarket segment is even more specific stating that only risks that can use the supermarkets general liability classification—18501—are eligible. Every risk written in a market segment must attach the appropriate MS xx 01 endorsement. This long endorsement provides a number of increases in limits, enhancements of existing coverages, and modifications of exclusions plus additional coverages to reflect the needs of the segment being covered. In addition there are optional endorsements which may be attached. Two coverages available in separate endorsements are Hired and Non-Owned Auto Liability Insurance and Mechanical Breakdown Coverages. Other coverages available include Extortion, Damage to Customers’ Vehicles, Delivery Errors and Omissions and Product Withdrawal. The rating follows the standard package rating method up to a point. There is often a charge associated with the coverage enhancements, but there is not a “one size fits all” methodology. The rating approach reflects the particular market. In addition, each of the optional endorsements has a specific rating method and the charges vary by market segment. It is important to review all of the additional coverages being provided in the required market segment endorsement in order to properly underwrite the additional exposures presented. Agents should determine what standard endorsements and coverages can be eliminated as a result of using the market segment approach. However, it is important to make careful coverage comparisons between what is provided under the market segments program and what is being considered for elimination elsewhere in order to avoid the possibility of a coverage gap. Please note that this is only an overview of this subject. A thorough discussion may be found in the PF&M Analysis from The Rough Notes Company. Agency OnLine subscribers, please refer to PF&M Section 194.1 for an overview of the Market Segments section. Refer to PF&M Section 194.10 to review the Restaurant Market Segment or 194.12 to review the Supermarket Market Segment. * |
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