Tag Archives: policy form

The Mystery of the Millennial Buyer

For several years, I’ve heard clamor from the agency world about how Millennials’ demands are so different from previous insurance buyers. Well, as a Millennial insurance buyer, I’m here to say… we still have some work to do. We still have a lot of work to do.

According to Accenture Outlook: Who are the Millennial shoppers? And what do they really want?, Millennials are exceptionally loyal …if they feel they’ve been treated right. And, we all know it’s cheaper to keep a customer than it is to get a new one.

“Right” is an incredibly subjective term and can certainly get lost in translation in the insurance world. “Right,” in the insurance world, typically means paying exactly what is fair for losses. No more, no less. That’s understandable, and, as someone in the insurance world, I understand the sentiment.

But I’d like to help you to understand how I define “right” as a Millennial insurance buyer.

Educate, don’t sell

The days of the uninformed insurance buyer are long gone. The added value of the agent is around education. Take a step back and help the Millennial customer understand the fundamentals of risk management and see that insurance is one of many tools used to manage risk. Millennials will identify the value that you bring to the purchasing transaction and remain loyal customers rather than commodity-buyers.

Empower them to make good financial choices

You empower Millennials to make smart financial decisions through education. This also means explaining the upsides and downsides of different policy options. For example, explaining how deductibles and premiums correlate, rather than trying to get them to take the lowest deductible. Millennials expect that, when they come to you asking for help in the realm of personal finance, you’ll be looking out for their best financial interests, rather than your commission check. As soon as a Millennial believes you’re NOT looking out for her best interest and are more interested in the sale, you have just made yourself the commodity.

No more fancy terminology

We have an epidemic of insurance buyers who have no clue what they’re buying. “Limit,” “peril,” “liability,” “occurrence” – these are not words the Average Joe and Average Jane have any practical reason to know, outside of purchasing insurance. Millennials won’t settle for someone who isn’t able (or willing) to give the layman’s definition of these terms. This requires you to have a real command of the fundamentals of risk and insurance, rather than a command of policy forms and exclusions.

Embrace technology to increase service

Sure you have a Facebook and a Twitter, maybe you even post regularly, but that’s not what will retain Millennials. Make yourself and your agency available to them on their terms: phone, email, text or social media. Encourage them to take pictures and videos of all their belongings if they don’t want to make an inventory list. Send periodic, non-marketing text messages to encourage safety. (Example: “With the coming cold weather, be sure you clean off your furnace and think about getting it inspected. Build-up can reduce efficiency, which costs you more money and might even cause a fire.”) These are the types of things that will differentiate you and your team from every other agent out there.

As an aside: If you want to serve Millennials, you must make online payments easy. Most Millennials don’t own stamps and are using the same checkbook they got when they were 16 and opened their first checking account.

Humanize them at claim time

Millennials want to be treated like the humans they are when claims hit, which, in all reality, isn’t asking much. Instead of aiming for that minimum threshold, exceed expectations by doing the following when you are notified of their claim: 1) Make sure they’re okay, 2) Check in and see how they’re doing and if they’re worried about anything (lawsuits, another loss, further injury, claim not getting paid, etc.), 3) Make sure you’re communicating with them, in addition to the adjuster, 4) Explain to them how this might affect future premiums. Claims are your time to shine, and, if treated well, Millennials can be some of the most loyal customers you’ll have.

In closing …

Insurance is a paper and a promise

Without anything more tangible than that, it’s not too much to ask to be treated well, as a smart and autonomous human being. If you can show that to your Millennial customers and follow it up at claims time, you’ll crack the nut that is the Millennial insurance-buyer.

The views expressed by the author are the author’s alone and do not necessarily represent the views of Aon or its affiliates. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial or other professional advice.

How to Find Mobility Solutions (Part 1)

Please consider this post to be a sort of noodlin’ around the ways insurers could apply mobility solutions. I do have a bias: I think that until insurers, and insurance agencies/brokers, can operate entirely using apps on smart devices they can’t really call themselves “mobile-next.”

To find potential insurance mobility solutions, focus on the customer (you know, the rascal who pays the premiums) and enable him to:

  • Access the insurance company/insurance agency web site using a smart device. This means that the insurance firm (carrier or agency) has to have the ability to push requested information to the customer’s smart device in a manner that fits the smart device. Fit for purpose, as it were.
  • Request and consume service on a smart device. This includes getting served in the manner the customer wants, whether text, voice or video and preferably in real time. This means the insurance firm must have the business operational service systems in the “state” necessary to provide effective and efficient service to the customer in the desired manner.
  • Self-serve by using a smart device. This would include accessing and downloading documents stored in the insurance firm or perhaps in a private cloud set up for the customer (whether COI, policy forms, claim forms or loan forms).
  • Begin and preferably finish a policy application entirely on the smart device using e-signatures (which were approved way back during President Clinton’s administration). I realize that quotes/rates and underwriting decisions could very well mean that it is not a “sign on and get it done in one shot” kind of situation. However, whatever stops and starts happen, the policy application process should stay in the mobile realm and never require the customer, anyone in the agency or anyone in the carrier to have to re-enter information.
  • File the first notice of a loss and track the entire journey of the claim adjudication from beginning to end, including getting an alert when the claim check is deposited in the customer’s requested banking account.
  • Use the smart device to pay a premium by taking a picture of a check rather than mailing in a check or even using a payment service to pay the premium amount.
  • Collaborate with claim managers, customer service representatives or others in the insurance firm (carrier or agency) using only the smart device.

Next post, I’ll discuss potential mobility solutions for producers. Being wildly creative about blog titles, I’ll call the post “How to Find Mobility Solutions (Part 2).”

But sticking with the insurance customer, what mobility applications would you add to the list above?

Nursing Home Insurance: Are Your Policy Limits Wasting Away?

Over the last 15 years, the nursing home industry has seen substantial changes in the liability insurance markets. At one time, insurers looked at the elderly population in nursing homes using traditional measures of damages like lost income and concluded that the industry was a risk worth insuring. The tidal wave of elder abuse litigation that drove sky-high verdicts changed the insurance landscape dramatically, resulting in a dearth of available coverage and forcing many nursing home entities to become self-insured. Insurance carriers are once again writing policies for the nursing home industry, but with significant changes in how limits of insurance work under some new Nursing Home Liability forms.

Nursing home policies typically combine a Professional Liability policy with a Commercial General Liability policy with limits set for an individual case or claim and an aggregate limit for the facility or company. The policies are written in a way to make sure a claim is covered under either the professional liability side or the commercial general liability side of the policy, but never both. For example, a policy might have a $3M aggregate and a $1M per claim limit. This means that no claimant can ever recover more than $1M on the policy, but the company's overall coverage does not exhaust until all $3M has been paid out. Traditionally, Commercial General Liability policies paid for an insured's defense outside of the per claim or aggregate limit. In other words, a $1M limit could only be exhausted by paying out that sum to a claimant. There was no limit on defense costs at all, which frequently put pressure on carriers to settle cases.

Many of the newer policies for nursing homes are now being written on a “wasting” form where defense costs erode the stated limits of the policy. This means that the insurance company has now capped its liability at $1M per claim, which includes both defense costs and any money paid to settle the case or satisfy a judgment. The effects of this change are profound. Nursing home entities and their defense counsel need to reconsider their limits and how they choose to defend claims. The prospect of an expensive defense no longer concerns insurers the way it used to. Now insureds have to worry about that instead.

If you are involved in risk management for a nursing home entity, you need to know whether or not your liability policy includes defense costs within the stated per claim limit. If it does, you have what insurance lawyers refer to as a “wasting” policy. The following examples demonstrate the way a wasting policy is different from traditional Commercial General Liability policies.

Example 1:
Suit Filed — General Negligence. Taking the case to trial results in Defense Costs of $500,000 and a Verdict for $1,000,000 Standard Commercial General Liability Policy with $1M per claim limit pays all defense costs incurred and the jury verdict. Insured would be responsible for paying any deductible or self-insured retention.

Example 2:
Suit Filed — Professional Negligence. Taking the case to trial results in Defense Costs of $500,000 and a $1M Verdict Commercial General Liability “Wasting” Policy with defense costs eroding limits. Insurance carrier pays $500,000 in defense costs and $500,000 towards the jury verdict. Nursing home is liable for remaining $500,000, as well as any deductible or self-insured retention.

As Example 2 demonstrates, if you have a wasting policy, a $1M per claim limit will be reduced by costs incurred to defend the case. Under a traditional Commercial General Liability policy, the insured could afford to take an aggressive stand in litigation and try to wear down plaintiff's counsel through use of extensive discovery, filing motions for summary judgment and even taking an appropriate case through trial. After all, the aggressive defense was being paid for by the insurance carrier, not the insured nursing home. Under a wasting policy, this litigation strategy can be disastrous. A nursing home could end up spending almost its entire limit defending a serious case, only to end up funding a large settlement or verdict out of its own pocket.

A wasting policy also has significant implications for defense counsel. Normally, insurer-appointed defense attorneys never want to get involved in questions regarding insurance coverage. They cannot afford to alienate the insurers that hire them as panel counsel, so they only want to focus on defending the underlying case. When defense costs are outside of limits, avoiding all things insurance is a safe course for appointed defense counsel. All of this changes, however, when you have a wasting policy because every dollar the lawyer spends on defense will not be available for settlement. It is imperative to know at the outset of a case if you have a wasting policy. If it is, liability needs to be assessed quickly and realistically in order to preserve as much of the limits as possible for settlement. Failure to do so may result in unfortunate consequences.

Nursing home insureds are also frequently defended under a reservation of rights from their insurer that may entitle them to hire independent counsel at the insurer's expense. Whether or not you are entitled to independent counsel based on a given reservation of rights is beyond the scope of this article, but risk managers for nursing homes need to know that insurers issuing wasting policies will take the position that the cost of independent counsel will also come out of the available limit. Therefore, requesting independent counsel who bills at a higher rate than counsel assigned by an insurer can have the unfortunate effect of depleting limits even faster.

Nursing home entities also need to consider the impact of wasting limits on the aggregate limit covering all claims in a given policy year. Where defense costs erode both individual claim and aggregate limits, a nursing home entity could successfully defend a number of cases and pay out no money whatsoever in liability, but still exhaust all available insurance coverage. For instance, a company with a $3M aggregate limit could successfully defend five cases to verdict at a cost of $600,000 per trial and have no remaining insurance whatsoever. While that example may seem unlikely, you have to look at your own company's claims experience to consider what type of limits are appropriate if you have liability coverage written on a wasting form.

Recommendations
Risk Managers should review all pending litigation and the policies that are covering those claims to determine whether or not defense costs are eroding limits. Talk with your broker about what types of liability coverage are currently available in the market. If you can purchase policies with defense costs outside of limits, that may be worth paying a higher premium. If your broker can only find insurers willing to write liability insurance on wasting forms, revisit your per claim and aggregate limits with your broker to determine if you are adequately covered.

If the thought of actually reading an insurance policy is too painful to contemplate, hire coverage counsel to do it for you. Of course, this assumes you have a copy of your policy. In many cases, brokers bind coverage and the policy is not issued for months. If you are about to purchase a new policy, make sure your broker confirms the type of policy form it will be issued on. Once the policy arrives, make sure it is what you were promised. Finally, if your liability insurance is written on a wasting form and you do get sued, have a frank discussion with your defense counsel at the outset of the case before significant defense costs are incurred. Get a budget and a liability assessment as soon as possible. If you don't, the financial consequences could be painful indeed.