Are
your customers properly insuring
if a
hurricane were to hit?
by Curtis M. Pearsall, Vice President, Agents' Errors and Omissions Department
It is probably accurate to say that most agencies know the finer points of writing coverage in their home state. They know the areas that require some unique handling and special coverages. They have a solid handle on their company’s appetite and any special underwriting and binding guidelines.
At last count, over 50 percent of the United States population lived within 100 miles of coastline. With the heavy migration towards the coastal areas, it’s possible that you may have a customer in these areas request personal or commercial lines coverage.
Whether you are in Upstate New York, Nebraska or Utah, will you know what to do when you get that phone call advising you that one of your customers has a coastal exposure? Will you know what coverage to provide to protect them if a hurricane were to hit? Their current location may already have an exposure to a hurricane that you have not addressed because you didn’t think it could happen. To prove this point, this morning, there was an AP story in our local paper entitled “Hurricane in New York City – It could happen.”
At this point, you may be wondering why I have chosen
to address this topic in this loss control article. I have written
in the past that nothing
brings out an agent’s mistake as quick as a catastrophe. As of
early October there were three agencies with E&O claims made against
them as a result of Hurricane Katrina. This probably does not surprise
you as many predict that there will be many more E&O claims before
all is said and done. What may surprise you is that the locations of
the three agencies are: Massachusetts, Pennsylvania and Georgia. Whether
they did anything wrong or not is unclear but there are some lessons
to be learned from this early data.
It is clear that you need to have the proper non-resident licenses to provide coverage for one of your customers going out of state. In many respects, that is the easy part. While you may know the company appetite for exposures in your state, it is possible that you don’t know if any of your companies are willing to write this out of state coverage. You don’t want to commit to binding the coverage without discussing it with the company. Make sure that they write coverage in the state and by all means, check out what their coastal guidelines are. Company guidelines on writing along the coast were tight before and you can certainly count on carriers tightening up these guidelines even more as a result of the recent hurricane activity.
You may want to consider identifying an agency in the location of the risk and allow them to handle it. While this would result in the loss of commission, you would be able to feel more comfortable that the risk is getting properly handled.
If you want to handle it yourself, properly insuring coastal exposures means that the topic of flood should certainly be part of the discussion. There certainly has been a lot of industry press pointing out that homeowners’ policies do not include flood coverage. It needs to be secured separately. If you are not familiar with this coverage (it is definitely unique), contact your local state agents association and see if they will be holding a seminar on this topic and send your staff.
In many situations, many carriers exclude wind when writing dwellings or homeowners along the coast. There may be other exclusions or conditions that you are not accustomed to so make sure that when your staff places coverage for customers along the coast they know what is covered and what is not. And be sure that the customer knows this before the loss, not after it.
Use the recent events to educate your staff that someday they may need to place coverage for a customer along the coast and knowing ahead of time how to handle it will be time well spent.