Insuring
For the Worst
by Curtis M. Pearsall, Vice President, Agents' Errors and Omissions Department
Back in July 1994, I wrote a loss control article with the same title. That article opened up with a question to the agents: "When you insure an account, whether it be personal lines or commercial, P&C or life, do you discuss insuring the worst that could happen?" The article spoke about flood insurance and earthquake and other catastrophes that we have experienced periodically in our lives.
Well, September 11th changed the definition of "the worst." While there is no doubt that America is going to recover from this (side note…Utica Mutual worked with the Utica United Way to host a one-day telethon for the victims of September 11 and raised $735,000!), it is important that we learn from this tragedy in how we approach the marketing and selling of our various products.
As buyers of insurance, we typically secure coverage for those perils that occur with some degree of frequency (fire, theft, liability,etc.). We have had a tendency to not buy protection for something that seemed very unlikely to occur. My suggestion is that in light of the events of September 11, if you have not been performing an exposure analysis review with your clients, now is a good time to start.
Typically, a face-to-face discussion is held with your
commercial accounts. You discuss what coverage they have and what exposures
they are uninsured for. 
Many
of the top agency management software systems have very detailed lists
of exposures broken down by class of business. These provide an excellent
foundation with which to work. For your personal lines accounts, if a
sit down discussion is not practical, use written communication to get
the message out. Advise them what is and what is not covered and encourage
them to contact your agency should they want broader coverage. In
either case, whether verbally or in writing, I suggest that you raise
the question at some point, "What is the worst that could happen?"
Getting back to commercial lines, I would guess that many of the commercial businesses in the World Trade Center were not concerned about extensive amounts of business interruption. After all, they were in the World Trade Center and what was the worst that could happen. Sadly, we now know what was the worst that could happen.
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There are many benefits of this approach:
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On a different note, many of the reinsurance carriers that "insure" insurance companies are considering the use of terrorist exclusions. If this happens, some companies may have no other choice but to pass on these same terms and conditions to your customers. Be on the lookout for notices from your carriers on this issue. While I always recommend that agents review the policies issued by the carriers before sending them out to pick up on errors, this review takes on an even further importance to identify any significant changes in coverage that you will need to bring to your customer's attention. The work that is going on in Washington on a possible Federal approach on "insuring" the terrorist exposure may change this.