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Archive for the ‘Caveat Emptor’ Category

Claim denied 1Purchasing an insurance policy enables us to shift the financial risk of paying for certain losses to an insurance carrier in exchange for the premiums we remit.   The terms and conditions of the transaction are detailed in a legal contract, or the insurance policy we receive. Knowing how hard it is for consumers to compare and contrast the terms and conditions between different policies, many insurance carriers market their policies by focusing consumer attention on the one part of the transaction they well understand: the cost. Meanwhile, savvy consumers and the trusted advisors who guide them should ask how it is some insurance carriers that sell policies at a cost far lower than other carriers can still earn a profit. Have some carriers developed a secret strategy? 

Their Secrets Revealed

One strategy some carriers use to lower the cost of coverage while maximizing their profits is to issue policies that protect consumers from fewer risks.  This works quite well, as the subtle yet important differences in the policy language (the proverbial “contract fine-print”) that detail the risks that are and are not covered by different insurance policies is very hard for consumers to discern. Another strategy some of these carriers use to maximize profits is to adopt claims practices that make it extra difficult for claimants to be reimbursed for losses that are covered.  In this scenario, aggrieved policyholders seeking payments that have been denied for losses that are covered by their policies must rely upon state regulators and the legal system to determine if the claims practices used by such carriers are or are not consistent with the terms of the contract.  For the many policyholders who do not experience a loss, both of these strategies can be dismissed as “no harm, no foul”.  Until a loss occurs.

A Simple Formula To Make Better Decisions

Consumers wishing to avoid learning these lessons the hard way — after a loss for which coverage is either deficient or inexplicably denied —- can be assured the remedy is both simple and logical:  conduct better research!  Here’s the simple two step formula:

  1. Enter the name of your insurance carrier (or a carrier are considering) in your search browser and then add these two words: carrier’s name claim practices”.
  2. Carefully examine the content on some of the sites revealed by the search to better understand that carrier’s approach to responding to the claims of their policyholders.

That’s it – just taking those 2 steps can arm consumers with important insights needed to make better-informed decisions and begin selecting coverage from insurance carriers that is actually worth paying for!

Why use the words “claims practices” in your search?  Again, more important than knowing the cost of coverage is to learn if the insurance you are paying actually honors their contractual obligations!  Do not rely on popular who-is-the-best-carrier survey results, as those findings include a number of less important criteria that are not reflective of a carrier’s claims paying practices.  Instead, research the two words that will reveal important insights on an insurance carrier’s claim practices and examine the far more revealing insights.

Search Results Can Be Eye-Opening!

The time-honored business practice of “not speaking poorly of competitors” is one I understand and respect.  To remove the appearance of bias and finger pointing, I encourage consumers to use the power of the internet to perform the above search for ANY insurance carrier. To illustrate the revealing insights that can be gained, consider just the first few results that appear in the screenshots below for a search on the two companies that insure more homes and cars than any other carriers in the United States.

Google SF

Google AS

To be fair: these carriers are often able to save many policyholders hundreds of dollars each year in premiums, just as their advertisements promise. Examining their claim practices can help to explain how they can do so while still earning a profit.

In Conclusion:  This information is provided in an effort to arm consumers with the insights needed to make better informed decisions about their insurance protection.  To protect ourselves from the shell-game advertising tactics that cleverly shift our focus away from what really matters (being paid after a covered loss) to something of lesser consequence but providing an immediate result we all want (a lower premium), it is critical to conduct better research. On any carrier. Then, read the reviews.  Those reviews can often expose the business strategies used by some carriers to fund the “savings” they have advertised to lure your business.

Think I’m making this up? To read an astonishing investigative report that details how State Farm and Allstate contracted with consulting firm McKinsey and Company to reduce their claims costs, simply enter the four words “McKinsey State Farm Allstate” into any search engine. Of all that has been reported about this sordid tale, The Insurance Hoax as reported in Bloomberg News is the most revealing. If you prefer video, check this CNN report by Anderson Cooper available on You Tube.     

Let the buyer BeAware!

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BuyerBeAwareThere are a number of policy provisions and claims settlement procedures that enable some car insurance carriers to dramatically reduce their costs when repairing a damaged vehicle.  The good news: those carriers are often able to charge less for insurance, since their repair costs are lower.

The bad news: This shocking recent report by CNN and Anderson Cooper explains that over 500 car repair shops in 36 states accuse many auto insurance companies of coercing them to use cheap parts and sometimes dangerous practices to fix vehicles involved in accidents.  The video evidence is alarming, and serves to remind insurance consumers the axiom “you get what you pay for” also applies to insurance coverage.

I encourage readers to examine this revealing report, and to contact a reputable Independent Agent to learn why it is important to consider the many benefits of insuring your vehicles with an insurance carriers like AIG, ACE, Chubb and PURE that provide coverage for repairs using OEM (original equipment of the manufacturer) parts, while also permitting their savvy policyholders to select the repair facility of their choice.

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Not knowing the right questions to ask about your insurance protection isask wrong among the key reasons far too many consumers hear the dreaded words “you are not covered” at the worse possible time — after a personal property or liability insurance loss.  Following are examples of frequently asked questions many consumers ask when making important decisions about their insurance protection:

  1. Am I “fully covered”?
  2. Can you lower my premiums?
  3. How much liability insurance do I really need?
  4. Do I have coverage for losses caused by hurricanes?
  5. Do I have coverage for the renovations / additions to my home?

While these questions are all valid and worthy of answers, there are many far more important to questions to ask to make sure your insurance program is providing the level of protection you will want in effect should you experience a significant loss.  For starters, consider what you might learn from the answers to these questions:

  1. In addition to the risks I am covered for, what are the risks I am not currently insured for?
  2. Are there any coverage gaps, policy exclusions or forms of coverage that have not been not offered that are exposing my assets to uncovered property or liability losses?
  3. How does the claims settlement process differ among insurance carriers?
  4. Are there effective strategies to control the cost of coverage without requiring me to sacrifice important protection?
  5. What services are available to help prevent or reduce the risk of loss?
  6. What can I do now to ensure the best outcome in the event of a large property or liability loss?

So whose job is it to help you know the right questions to ask so that you can reduce the risk of experiencing an uncovered loss? Consumers should seek insurance advice from independent insurance agents who serve their clients as risk advisors by offering insightful answers to the many important questions that are often never asked . Think risk-coach, and not someone who is simply skillful at using clever selling techniques.

To learn whether you are working with an insurance agent who is truly focused onhelping you make well informed decisions to properly manage your risks, here’s a good question to ask that person: “Are there other questions I have not asked that could help you better assess my exposure to uncovered losses?”  The answer you receive can help you determine if the person whose job it is to help you understand and manage your risks is actually focused on that objective. If they are not, it then becomes your job to find one who is.

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CXWhat was once old is new again.  With all the expensive new studies on “Customer Experience” for sale, consider these free yet profound words from many years ago on CX from Miss Manners:

“True service can only be provided by thinking people who have the imagination to put themselves in the place of the customer, figuring out what he needs and how it can most easily be done, and who have the largesse and grace to be pleasant about it.”

Thinking. Imagination. Figuring out. Easily. Largesse. Grace. Clearly great customer service is more involved than a smile, answering the phone by the third ring, making sure invoices go out and hanging a nice mission statement in the lobby. But it isn’t rocket science, either.

Is it really that difficult to find “thinking people who have the imagination to put themselves in the place of the customer” to assist with your insurance program?  The implications of this statistic from an industry study suggest it sure can be: while 85% of personal lines customers believe having professional standards met by agents is important, only 30% of independent agents surveyed thought consumers cared about such standards. Clearly, more than a few insurance agents don’t know to put themselves “in the place of the customer”.  Fortunately, there are others who do!

The key is to become aligned with an insurance agent who views their own service standards and performance from the perspective of the clients he / she serves.  Are you working with an insurance agent who is truly delivering a consistently exceptional customer experience? If not, I can provide a confidential recommendation to highly experienced independent insurance professionals who meet the above criteria.

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UGWUP4There are a number of policy provisions and claims settlement procedures that enable many car insurance carriers to reduce the costs to repair a damaged vehicle. 

A recent report by CNN explains many car repair shops accuse auto insurance companies of coercing them to use cheap parts and sometimes dangerous practices to fix vehicles involved in accidents.  I encourage you to examine this report, and to contact us me learn why it is important to consider the many benefits of insuring your vehicles with an insurance carrier that provides coverage for repairs using OEM (original equipment of the manufacturer) parts.  Click this link to read the CNN Report

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One of the more thoughtful bloggers I’ve discovered recently is Don Shaughnessy.  In this insightful post, https://moneyfyi.wordpress.com/2015/04/03/9285/  Don reminds readers all too often, consumers are lured by marketers into asking the wrong questions, and in the wrong order.  It prompted me to re-post below a similar message I learned 4 years ago from Carl Richards:

Perhaps 95% of the consumers and professional advisors I meet with attempt to focus their discussion simply on the insurance policies they own.  Ours is a product focused culture, and our buying decisions are guided by products receiving 5 star reviews, Consumer’s Digest Best Buy recommendations, and / or finding a “good deal”.  The power of product advertising has robbed us of the ability to ask ourselves the larger questions.   Questions like “Why am I buying this product?”

Why buy insurance for your home?  Why buy insurance for your car?  When I ask these questions of my clients, I often receive an expression suggesting puzzlement, annoyance, or both.  To ease both emotions, I ask if the reason is to replace what they own in the event it were damaged or destroyed.  “Of course!” is the most common answer.

Since the real reason to buy insurance is to protect and restore our tangible and / or financial assets in the even of an unforeseen loss, why is “Save Money Now” the central theme in most insurance company advertising campaigns? Sadly, it is because advertisers have reminded insurance carriers that many consumers respond to “save money” offers.  To gain market share, they focus their ads on product, making “save money” the product.  Do consumers ever wonder how the savings are being achieved?  Insurance carrier benevolence???  These campaigns are effective, and despite the “savings” provided to some consumers, these carriers earn a profit, content to sell products that often do not provide the desired protection.  All because no one ever asked “Why”.

Carl Richards, Contributor at New York Times Bucks Blog and the author of Behavior Gap, reminds us that in the financial services industry, consumer focus on product is exploited by those who are paid to sell product. Richards is well-known for using illustrations that lend clarity to issues that many journalists do not understand. While the lesson of the illustration above is aimed at investors, it is just as relevant to those seeking the right way to protect their homes, cars and other assets from unforeseen loss. Richards explains: “Most of us are trained to think ‘What’ first, because it’s what you hear about all day long. It’s the message you read in financial publications and see on CNBC. But ‘What’ questions should come after we think about ‘Why’ and ‘How’ ….Starting with ‘Why’ means achieving clarity about your personal financial goals and creating a plan.” Thank you, Carl Richards, for reminding us that before we focus on the ‘what’ product solutions, we first need to start with asking ourselves the larger ‘Why’ questions.

For more about Carl Richards work: http://www.behaviorgap.com/

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It seems impossible to keep up with all of the new strategies being used to steal our identity and private information.  While enhancing personal privacy is a broad topic, many of the most important strategies are easy to implement yet often overlooked.

For example: ALL of the experts I’ve spoken with strongly recommend using credit cards over debit cards whenever possible.  Why?  Credit cards receive far greater protection for fraudulent transactions than debit cards. With a credit card, the maximum exposure is usually $50.00. With debit cards, your exposure to fraudulent charges vary based upon when you notify the provider. If you report the fraudulent transaction within two days, your exposure is limited to $50. If reported between 2 and 60 days, your liability can be $500.00. Failure to notice / report within 60 days and you will be liable for the entire fraudulent transaction.

There are a wide range of specialized firms offering personal privacy services. Call me should you wish an introduction to a personal privacy expert.

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910362-businessman-plays-bad-financial-business--constructed-on-deceitAttention Shoppers….

Large retailers like Walmart and Overstock.com have recently announced they are providing shoppers the ability to add insurance to their carts. Of course, leveraging their size to sell commodities at a lower cost is what Walmart and Overstock.com do very well. Unfortunately for consumers, insurance is NOT a commodity, not even car insurance. This inconvenient truth has not deterred Walmart or Overstock.com from perpetuating and trying to cash in on this dangerous myth.

Let the buyer beAware:  there are subtle yet dramatic differences between even car insurance policies that consumers need to be aware of. Bill Wilson of the Insurance Agents and Brokers of America is an educator and insurance consumer activist, helping both agents and consumers to better understand the important “policy fine print” that differentiates coverage among carriers.  Listed below are examples Wilson provides to illustrate the important coverage often omitted from the policies advertised as “same coverage, better price”.

  1. Undisclosed household residents are excluded.  Think “boomerang” kids living at home.
  2. Business use of non-owned autos is excluded. Have you ever borrowed a neighbor’s car or had a dealer loaner auto and made a business stop?
  3. Business use of ANY auto is excluded.  Big problems for those driving to Staples or the post office on business
  4. Use of ANY non-owned auto is excluded. Better not drive anyone’s car but your own.
  5. Vehicles over 10,000 GVW are excluded. Have you ever rented a U-Haul truck or an RV thinking your liability coverage extended to the rental?
  6. Any type of delivery is excluded. Denied claims include pizza, newspapers, Mary Kay cosmetics, and, yes, even the delivery of insurance policies to customers by an agency producer.
  7. Permissive users only get minimum limits of coverage. This can apply to those you loan your car to or even unlisted household drivers.
  8. “Street racing” is excluded. Google “street racing” and see how often people are killed or critically injured while street racing.
  9. Criminal acts are excluded or limits reduced. Don’t think bank robbery; DUI or even speeding tickets may preclude coverage.
  10. Medical payments only include licensed physician fees. One insured incurred a $25,000 “Life Flight” helicopter fee that would not be covered, even in part, by a policy with this exclusion.
  11. Theft without evidence of forced entry is excluded. One insured had a four-figure vehicle theft loss denied because he forgot he had left his keys in the car.
  12. Sales tax is not covered under loss settlement. This cost one “same coverage” insured over $2,000 out-of-pocket for sales tax on a replacement auto.

I can think of additional examples of protection present in some auto insurance policies but not in others. The important take-away for consumers: knowing the protection provided by different insurance policies varies, be very wary of the modern-day shell game tactics used by sales organizations (of any variety) assuring you they are offering “the same coverage for less”.

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Fine print redI often hear senior executives for leading insurance carriers lament the common public perception that insurance products are a “commodity”, to be differentiated only by price.  I share the concern about this dangerous mis-perception, and work hard to help others realize the protection provided by policies as common as homeowners and automobile insurance can vary in many important ways.

Meanwhile, I believe the insurance industry contributes greatly to this problem, and often ask carrier executives why we in the industry — both carriers and brokers — are not doing more to fix it. Many in my industry are not pleased with this view, and often bristle at the question.

How does the industry contribute to the perception that insurance is a commodity?  Consider the commodity oriented messages behind glib advertising campaigns imploring consumers to invest just 15 minutes to save 15%, or to “name your own price”. What message is to be received as policies renew each year from those insurance carriers that send only the few declarations pages of the policy and not the entire policy?  Armed with the scant information provided by a few declarations pages, consumers focus on what they can see —-  the limits of coverage and the premium.  The implication: if the actual policy language detailing the risks that are and are not covered was important we would have sent it. Is it any wonder why consumers perceive cost is the only differentiator when buying insurance?     

Carriers can help consumers better understand the protection they provide by revising the contract language used in their policies to be more easily understood, and sending the entire policy each year upon renewal. Agents and brokers can also be of greater assistance, as too many limit their client conversations to review only coverage limits and associated premiums. While coverage limits and cost are important, few agents expand their conversations to also explain how one carrier’s coverage may provide protection that is different from the next carrier.

Consumers who REALLY wish to understand the protection provided by their policy should ask their insurance provider to document the risks that are NOT covered by their policies, as well as the risks for which coverage is significantly limited. “What are the risks that are excluded by this policy?”  Expect many providers to be stumped by this basic but essential question.

If you or your clients are interested in learning what is NOT covered by your policy, call me to examine the “Fine Print Protection Audit” report I make available for my clients.

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It is my experience that most licensed insurance agents are usually able to answer their client’s coverage questions correctly.  Meanwhile, many problems arise simply because consumers simply do not know the right questions to ask to get the information they really need Should it be the consumer’s job to know the right questions to ask?

In reality, learning how to help their clients ask the right question is a skill that few insurance professionals ever master. As Hurricane Irene was chewing up the coast in NC this summer and heading north, our staff received numerous calls from clients asking “Am I covered for a hurricane?”. The question our clients really wanted answered:  “How will my coverage protect me for losses I may sustain from a hurricane?” Knowing this was what our clients really wanted to know, we were able to re-frame the question and provide a much more complete answer.

Of course, more complete answers can sometimes be disconcerting, especially when they are only being provided as a hurricane approaches.  Few consumers take comfort in being reminded, for example, that while a homeowner policy does provide quite a bit of coverage for damages caused by a hurricane, NO policy provides the mythical “full coverage” we’d all like to have.  The “Fine Print” of any policy explains in detail the damages that are and are not covered, and coverage varies widely among carriers.  Consider the following:

  • Unless you have specifically requested to purchase flood insurance, you will not be covered for losses that are caused by water that rises from the surface and enters your home by your homeowner policy.
  • Conversely, rain water that enters your home through a damaged roof or window is not a “flood”, and is covered by almost all homeowner policies.
  • Almost every homeowner policy in the NY Metropolitan area has two deductibles: one that applies to losses caused by a hurricane, and one that is applied to all other covered losses.  All consumers should know well in advance of a hurricane what their deductible will be for losses caused by a hurricane.
  • Because Hurricane Irene had been reduced to Tropical Storm status was when she reached NY, covered losses were adjusted using the (lower) deductible that applies to all other losses.  Next time we may not be so lucky….
  • Homeowner policies do not provide coverage to replace trees damaged by wind, hurricane force or not.  There is, however, limited coverage to remove downed trees, though policies vary widely on the circumstances under which this coverage is available, and how much coverage is provided.
  • For the many who lost power, can I suggest the purchase of (at the  least) a portable generator before next hurricane season?  Homeowner policies do provide limited coverage for food spoilage caused by a power outage, but by the time the deductible is subtracted from the claim, the cost of a portable generator would have been paid for and no spoilage would have occurred.

Two primary takeaways from all of this:

1. To make well informed decisions, insurance consumers need skillful guidance to ensure they are not only getting the right answers…. but also to the right questions.

2. It is just as important to examine the right questions BEFORE a risk arises.

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