In a prior article on our website about inexperienced commercial agents, we explained why many licensed insurance agents are moving away from focusing on home and auto insurance to move into commercial insurance due to inflationary pressures on insurance companies and their decisions to exit the Texas Insurance Marketplace. We wanted to follow that up with a real life story where an independent insurance agent casually provided an insurance proposal to one of our clients that could have ultimately no only cost him his business, but also his entire life savings! Let's take a look at how this simple story played out that is not uncommon in the insurance industry right now.
One of our clients is a home builder that our independent insurance agency has worked with for the last three or four years. He is a very highly respected builder for his particular trade. While he was at a golfing event that was specifically for contractors, he happened to come across another commercial insurance agent. While it may be shocking for a lot of Texans, a lot of insurance agents like to play golf. Ironically, the agents at Insurance For Texans don't play golf, but our client was out at the golf course. Of course this competing agent pitched the opportunity to look at his insurance policy for his business as any great salesperson would! But here is where our story takes a bit of a turn.
The Commercial Insurance Proposal
Our client, as any business owner would in the current inflationary conditions, gave the other independent agent the opportunity to review his commercial insurance policy. The proposal came in several thousand dollars less for the insurance rates with a different insurance carrier than we currently have this skilled contractor placed with for a couple of specific reasons. On the surface, this piqued his interest and created a sense of doubt as to why he was paying so much!
When the contractor called in to speak with one of our commercial insurance agents, the conversation from him was very straightforward. He wanted to know why he had never heard of this other insurance company and why his insurance products were so danged expensive! This doesn't seem real difficult to understand from his perspective. But let's take a step back and evaluate some specifics of his insurance coverage and why it's important to make a truly informed decision about how to properly protect your business.
Why Does Some Insurance Cost More And Why You Should Buy It
During the ensuing conversation with this highly successful business owner, we honed in on key points that make his selection of insurance options very critical to his ability to stay in business.
- The proposal from the competing commercial insurance agent was provided from an insurance company that we choose to NOT do business with. This is because of our experience with this particular company and how they handle claims, accounting for audits, and other customer service related issues. Many insurance brokers have access to them, but that does not mean that we approve of how they treat business owners.
- The second reason that the proposal was a poor selection of products for this business owner has to do with policy exclusions. Policies give coverage to insureds by extending terms included in the policy language. Exclusions to a policy take coverage away by explicitly excluding certain items or activities. This insurance policy proposed had an exclusion specifically around tract home work.
- The third reason that the proposed insurance policy from this independent agent had to do with the cost of an endorsement. Since the policy had the exclusion for tract home work, an endorsement could have given that coverage back to the policy. However, in this instance, the cost of the endorsement to buy back the coverage for the tract home work would have been far more than the savings that were provided in the initial proposal.
If you're not familiar with tract homes, it is when a builder drops ten to twenty or more homes in a single neighborhood. More than likely, you've lived in or bought one of these types of homes because of how Texas has developed property over the last four decades. This contractor is so well respected, that tract home builders love to use his skills. Which is a great thing for him and his business. The danger to the insurance company for covering this activity is that if he makes a mistake in one home, it is likely he has made this same mistake in ALL of the homes in the neighborhood. This is not an expensive claim situation, but also provides the ability to face a class action lawsuit if enough homeowners are damaged. Expensive just turned into frightening for an insurance company.
A great insurance professional will do their due diligence in fact finding with a new prospect. Have you ever wondered why your commercial insurance agent is asking you so many questions? This exact scenario is why! The problem becomes insurmountable when an insurance policy that is proposed to cover tract home operations with an exclusion clause that specifically forbids it. If you think it's covered as a business owner and it's not, who is going to pay for a claim against you? The insurance agent or insurance broker certainly isn't going to step up and pay it willfully. Can you pay for a claim or an entire class action lawsuit? This is why the successful insurance agent asks you all of those questions that may seem like a giant waste of time or hassle. But ultimately it is to make sure that you do not lose your business by an avoidable error.
So Who Can I Trust?
In the end, you need to understand what you have at risk and how to tell if your commercial insurance agent is full of it. There is an old saying that if it sounds too good to be true, it probably is. And that is especially true when considering a massive price drop in your commercial insurance rates. With most independent insurance agents going to the same or similar insurance brokers to obtain new policies for you, it's unlikely to see a massive shift in price assuming that all terms and conditions are the same. Especially for endorsements and exclusions.
We recommend interviewing a prospective commercial insurance agent prior to obtaining a proposal for coverage from them. Listen to the questions that they ask. Are they digging deep into your business and finding what your overall operations look like? Listen to the words that they use when assessing your risk. Is the focus always on price, or is the independent agent talking about the value of protecting your business? Listen to the pace of the process when talking about making a change. Are they trying to move very quickly or are they including time to assess things appropriately?
These questions will separate the successful insurance agent from the guy who woke up last week and decided that he needed to change his focus. The successful independent agent is going to focus on you and your business' risk. At Insurance For Texans, we work for you and not some single insurance company. Our independent insurance agents focus on bringing value to a relationship with you. If you like that level of care and service from the person who works for your business insurance, hit the button below or call us at 469.789.0220 today.