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Top Ten Questions for your Insurance Agent

Maybe you haven't had a coach since you played Little League in the 6th grade. Nowadays, there are coaches for grownups as well as for kids, in business as well as in sports. In fact, there are now a slew of corporate coaches who mentor business professionals. In an Internet mailing list called Coach University, business "coaches" Winston Connor and Thomas Leonard offered the following Letterman-esque list of the "Top Ten Questions to Ask Your Insurance Broker." The list is theirs, but the annotations are this risk professional's advice on why the questions make sense.

Next time you sit down with your insurance brokers -- whether they're from a small shop, a regional firm or one of the huge "alphabet houses," pose the following questions:

  1. "How much coverage do I need for . . ?" Brokers will be understandably gun-shy about answering this question. Reason: clients sometimes sue them when they later learn that they were left underinsured. Wary of taking on a large professional liability exposure, brokers tend to dance around this question.

    Remedy: put them at ease. Tell them you understand there are no guarantees. Offer to sign a waiver that you will not sue them for "failure to designate policy limits" down the road. After all, if an insurance broker can't answer this question, who can? It's their business. They should know. Ask them to take a stab at the question.

  2. "What should my deductible be?" How high is up? The higher your deductible or self-insured retention, the lower your insurance rate and premium. Put another way, you might be able to buy more coverage at the same price if you're willing to step up to a higher deductible. Insurance brokers can use their experience and insight to suggest the right deductible level.

    Don't get a deductible so low that you are simply swapping dollars with the insurance company. By contrast, avoid one so high that it causes your organization financial distress. It's a fine line calibration call, and a seasoned broker adds value by helping you find the right inflection point.

  3. "What strategy gives me the best protection for my money?" Cheaper isn't always better, whether you're shopping for cars or for financial protection. Brokers can help you find the cheapest quote, but you're not getting full value from them if that's the extent of your marching orders. The trick is to balance price with quality of financial protection. This involves having your broker find not only a "cheap quote," but the best total value, based not just on price but including financial size and strength, claims-paying ability, reputation for service, and so on. The best protection for the money won't likely be the most expensive insurance policy, but it may not be the cheapest one, either.
  4. "What happens if . . ?" Brokers should help you spin scenarios and formulate an action plan in response. For example, what happens if my property carrier goes into receivership? What if the 100-year flood or earthquake occurs this year? What if two carriers squabble over who covers a claim? What if you leave to join another brokerage organization? Risk managers and insurance buyers should use brokers as professional sounding boards, listening closely to the advice and counsel. Keep your broker on his or her toes by pitching frequent "hypotheticals," not because you enjoy yanking their chain, but to keep your -- and your broker's -- "head in the game" regarding corporate uncertainty and how the two of you will collaborate to manage and minimize it.
  5. "What role will you play if I have a claim or a dispute with an insurance company?" Will the broker go to bat for you? Just how claims-savvy is your broker? Does the broker act as a forceful but diplomatic advocate for you in trying to get an insurer to treat you fairly, or does the broker dump problems in your lap, fatalistically shrugging your shoulders. In disputed claims, brokers can lend help by:
    • refuting an insurer's mistaken coverage interpretation
    • ppealing to a higher authority within the insurance company structure, to get a fair hearing for an insured's position
    • inging the disputing parties together and facilitating amicable resolution
    • using its clout and influence with an insurer in order to get flexibility on gray area coverage situations
  6. "Should I buy an umbrella policy?" These give you extra coverage, over and above your primary insurance. An interesting twist on an umbrella policy is that it covers some perils which are excluded by a primary policy. (By contrast, excess policies are usually written on a "following form" basis, with the insuring agreement and exclusions generally mirroring each other.)

    Some insureds may consider an umbrella policy a waste of premium dollars. Others may consider it a prudent safeguard to protect the organization's assets. There is no pat answer. A savvy broker should be able to help you make this decision.

  7. "Do I need a separate policy or 'rider' on my home office?" More and more business professionals work at home. This may be an extension of their 9-to-5 job or a little moonlighting business. At home, the risk manager may have a laptop computer, a desktop computer, fax machine, laser printer and scanner. Further, the risk manager may have important business papers.

    What happens if business personal property is lost, damaged or destroyed because of a fire or flood at the risk manager's home office? The answer better not be, "Oops!" A seasoned broker ought to be able to weave a seamless coverage sphere between the work place and the homestead, including making sure that the risk manager's homeowners coverage leaves no gaps.

  8. "What are the biggest mistakes you see clients make in buying insurance?" Insurance brokers have seen it all. They have likely watched other insurance-buying clients make the same types of mistakes over and over. Don't press brokers to name names, but do ask them to tell you the most common mistakes they see. If the broker says she can't think of any, maybe think about getting a new broker.
  9. "What insurance should I not buy?" Some types of insurance may be unnecessary, either because the chance of loss is remote or because -- the opposite -- it is so certain that you would simply be swapping dollars with an insurance company. Candidates for this category might be credit insurance, extended warranty coverage on certain types of business property or low/no deductible coverage.

    A London broker recently began offering alien abduction insurance. For $155 in premium, the insurer will pay you $160,000 if you're abducted by aliens, and double that if you're impregnated during abduction. Since alien biology is largely unknown, men along with women can purchase the impregnation rider. E.T., phone your broker!

    Moral: Even if you don't have coverage quite as over-the-top as this, have your broker survey your entire coverage portfolio and tell you what insurance you don't need or to stratify which lines of coverage are most expendable.

  10. "What other questions should I ask you?" Ask the brokers; they're the ones who are supposed to be the experts. For example, should you consider compensating your broker on a fee-for-service basis instead of commissions? If you were in my shoes, what additional questions should I be asking? Have we covered all bases?

    Are there any loose ends in your organization's risk management program, from your vantage point. As an outsider with insurance insight, the broker can give you a perspective on your company -- and your risk management program -- that you just can't get elsewhere.

    Your insurance broker is a vital part of your risk management team, even if he or she is employed by another company. Whether you're paying your broker on a commission or a fee for service basis, you deserve to get full value for those dollars. Use this checklist of questions to upgrade the value you and your company derive from the brokerage relationship.


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