Are
your customers properly insuring
if a
hurricane were to hit?
by Curtis M. Pearsall, CPCU, CPIA
Special Consultant to the Utica National E&O Program
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 toward 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, in recent years there was an AP story in our local newspaper titled “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 quickly as a catastrophe.
It is probably fair to say that over the last 20 years, every hurricane that has touched land in the United States has resulted in E&O claims. It is interesting that with many of these hurricanes, there have been claims from agents far from where the hurricane hit land. With Katrina, there were actually claims from agents in Massachusetts and Pennsylvania!
There are lessons to be learned from this:
- Your agency needs 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 their coastal guidelines. 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.
- 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 flooding must be part of the discussion. There certainly has been a lot of industry press pointing out that Homeowners’ policies do not include flood coverage. This must be secured separately. If you are not familiar with this coverage (as it is definitely unique), contact your local state agents association to see if they will be holding a seminar on this topic. If they are, send your staff.
- When your staff places coverage for customers along the coast, make sure your folks know what is covered and what is not. In many situations, many carriers exclude wind when writing dwellings or Homeowners along the coast. There may be other exclusions or conditions you are not accustomed to, so a knowledge of what is covered and what is not is essential. Be sure that the customer knows what is and isn’t covered, too – before the loss, not after it.
- Use recent events to educate your staff to the reality that someday they may need to place coverage for a customer along the coast – and that knowing ahead of time how to handle it will be time well spent.