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What brokers and agents can do to help clients prepare for disaster — and help their personal insurance business in the process
A recent survey by the Independent Insurance Agents & Brokers of America (IIABA) found that many homeowners lack adequate insurance coverage, do not understand their Homeowners policies and are financially unprepared for a disaster.
As eye-opening as those findings might seem, they also reveal an opportunity for brokers and agents to educate their clients, then connect them with the coverage they need to protect themselves and their assets if disaster strikes. Personal insurance experts Bill Gatewood, Vice President and Director, Personal Insurance, Burns & Wilcox, Corporate Headquarters, Donna Dodd, Vice President and Director, Personal Insurance, Burns & Wilcox, and Madelyn Flannagan, Vice President of Agent Development, Education, and Research at IIABA Trusted Choice, offer their insights on what it takes to make coverage connections in today’s marketplace.
Q. What are some of the common misunderstandings homeowners have around insurance coverage?
Bill Gatewood: Many do not understand that flood is not covered under common Homeowners policies, or they think that they do not need flood insurance. People may hear terms such as 100-year or 500-year flood that lead them to think a flood will not happen to them. Unfortunately, when they have six feet of water in their living rooms, they learn the hard way that it can happen.
Madelyn Flannagan: Many homeowners do not understand how contents are covered under a policy. Sometimes people assume they have replacement coverage when they do not. If people have a fire or theft and lose some high-value items, it becomes a big issue. They also do not understand that things they do can impact coverage, such as leaving their homes vacant for a period of time, which can cause coverage to lapse.
Q. What are some of the effective strategies brokers should be using to help homeowners?
Donna Dodd: Even if people understand flood exclusions, they may not address them. Less than seven percent of those in at-risk areas carry Flood insurance. Even though brokers quote Homeowners insurance often, they are not as familiar with Flood coverage. They should quote Flood insurance with every Homeowners quote and let the client decide if they want to purchase the coverage. Familiarizing both the broker and the client is key to getting homeowners to purchase the coverage.
Gatewood: Brokers also need to be risk managers and go through the same review process with homeowners that they would go through with commercial clients. There is a real need for brokers and agents to have conversations with their clients around things that are excluded in a policy, in particular explaining that flood is not covered, to help them make educated decisions.
Flannagan: I am a big proponent of meeting with clients at least annually and walking through changes made to a home since it was first written. A lot of folks make changes and additions without telling their broker. Particularly with the online tools and apps available for cataloguing contents, brokers can easily provide assistance to their clients.
Q. Changes are taking place in Flood insurance. What do brokers and homeowners need to know? How can brokers capitalize on the opportunity presented by those changes?
Dodd: Those most at risk for flood who do not purchase coverage say the coverage they need for basements or additional living expenses is not available under the National Flood Insurance Program (NFIP). Allowing private insurance to compete with the NFIP will help bring the rates down and supplement the coverages previously not offered by the NFIP. Congress is working on passing a bill that requires lenders to accept private Flood coverage in lieu of the NFIP where coverage on a home is mandatory to closing a loan.
Q. In addition to providing proper insurance coverage, how else can brokers help homeowners be better prepared if disaster strikes?
Gatewood: Insurance brokers and agents should work together with financial planners, who are trying to help consumers invest and grow their finances. Part of that should include a smart risk management strategy to protect that wealth. There are opportunities for brokers to elevate themselves in the eyes of the client. If clients lack a Personal Umbrella policy, a large judgment can wipe them out. Similarly, if clients lack adequate Homeowners coverage, it could cause a significant financial loss.
Flannagan: Sitting down with clients to make sure they understand deductibles and make choices around deductibles that fit their financial situation is essential. Many people are unprepared for disaster, with more than half having just enough savings for three months or less of expenses. Over 28 percent could not sustain their household for even a month. Saving money is part of risk management, along with insurance, and brokers should stress that to clients.
Q. What specific advantages do independent brokers and agents have when it comes to managing risk for homeowners?
Flannagan: A lot of people are researching coverage online, but a recent survey says that at least 70 percent turn around and ask a broker for help. Brokers and agents can walk through the insurance-buying process with clients in a way that is difficult to do online. Independent brokers and agents also have a multitude of policy forms and specialized coverages to offer.