Oftentimes, we speak on little nuggets of insurance policy language while missing the boulders of information right in front of us. So, today I am going to write about some of "the insurance basics" that, in my opinion, need to be addressed.
Why discuss insurance basics in an agriculture insurance column? Well, the other day, a colleague and I were speaking about what new classes we were in the process of developing for the coming year. We were tossing back and forth ideas about this new cyber class, a broadening discussion on the sharing economy, looking at pollution from a different vantage point … all sorts of ideas that we were pretty certain are going to be in demand from our current client list as well as attractive to new potential clients.
Then we received an email request from one of our current clients that completely floored us. As we were in discussion with that person about the classes we were going to provide later in the year, he asked for a class on "how deductibles work." This is a large national brokerage firm that was asking for something so basic … or is it really so basic? Perhaps a review of insurance fundamentals is in order.
The Named Insured
What do you do when you first engage a prospect and start your process of determining what level of risk they want to accept? You've spoken about what is important to them, how they would recover if a loss were to occur to a certain piece of equipment or to a particular building, what would they do if, while spraying their crops, an overspray situation happened … you know, all the cool stuff. Then you are faced with one of the most important questions that you need to get right, or all else does not matter—WHO is the insured?
While not earth shattering, it is one of the most important items that we need to get correct, or, truly, all else will not matter. Why? Because, in farm coverage (and many other) forms, we see language that says: "Throughout this coverage form the words 'you' and 'your' refer to the Named Insured shown in the Declarations." If we do not get the named insured correct, all else is lost.
Questions To Ask
Be sure to ask the following questions.
- Who holds the title to the property in question?
- Is that person/entity the sole owner of the property?
- Do any others have a financial interest in the property that needs to be protected?
- Has the property ever been owned in a different manner?
- Has the owner operated under any other names, partnerships, joint ventures, etc.?
This list could go on and on, but you get the gist of it. Note: Do not just ask for their current policy and copy down what the prior agent has put down. Dig deeper, be thorough, and cover all the bases.
It is actually pretty simple. Getting the named insured correct is the first step in having the potential for coverage to apply. If it is not, you may be facing some terrifically entertaining errors and omissions discussions.
The ACORD 401
You may not refer to the Association for Cooperative Operations Research and Development (ACORD) Agriculture Application as the ACORD 401, or you may. Regardless, it is one of the first tools agents/brokers have at their disposal to make a great first impression on their underwriter. A completed ACORD app can be a thing of beauty. Alas, so few are complete that beauty is often proverbially "in the eye of the beholder."
You see, I view the job of an agent/broker as this: to use the written word and make the potential insured/risk come alive for the underwriter. Those who do this well will find that their submissions do the following.
- Are dealt with in a more timely manner than others
- Receive better offerings and terms
- Have greater accessibility to the underwriters
- Have better discussions and negotiations with underwriters
- Have an easier time getting to "yes" rather than getting to "no" with underwriters
- Make more sales because they have better overall offerings
About midway on the first page of the ACORD 401 is an area that states: "Describe Farm/Ranch Operations and Any Incidental Business Activities." The operative word here is "describe."
Some of you know that I am privileged enough to speak at the Emmett J Vaughan Agribusiness Conference that IRMI holds in various locations nationwide. When I am in those classroom settings, I am surrounded by some terrific insurance professionals: marketing, claims, underwriters, customer service, account managers, and producers—all of these and more show up in those classrooms. So, I have been able to ask underwriters across the nation the following simple questions.
- What is the shortest "description" they have ever seen in that ACORD 401 field?
- How do they feel and respond when they get that brief descriptor?
Their answers? "Farm" is "not very helpful." Then we all have a good laugh. But think about that for a moment. If your idea of a description of your insured's operations on a farm ACORD application is to describe it as a "farm," you're basically insulting the underwriter. This is the first opportunity to brag to the underwriter about the terrific, one-of-a-kind, well-managed, risk averse farming operation that they have seen all day—or perhaps all week. Don't blow this opportunity.
At the very least—and I do mean at the very least—it's important to fill out that box on the app with all sorts of descriptive information about the farm's operations. Preferably, put the words "please see attached narrative of the insured's operations and activities." In addition to that simple approach, photographs (or better yet videos) of the insured's operations go a very long way in assisting the deskbound underwriter in understanding the totality of the prospect's operations. Don't leave it to your underwriter and Google Earth. Bad first impressions can be difficult to overcome. Positive first impressions of a risk lead to favorable considerations going forward.
If you don't care enough about your insured to provide a solid and professional submission, why should your underwriter care enough to go out of the way to help you in writing the risk? And, if you do not know about the risk, then how can the underwriter feel good about doing their best work on your behalf as you have not given them enough information to adequately do their job!
Control the initial message. Show the risk in the most favorable light. Pay attention to the small yet significant details that can assist ourselves in getting to "yes" with the underwriter with the most favorable terms.
More on insurance basics in another article.
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