The insurance industry faces a number of challenges in personal lines underwriting. Renters are more mobile than ever, and that presents challenges. More and more people are spending time traveling for work, which means more homes are spending more time unoccupied.
The internet of things might change the industry. But one of the largest challenges facing personal lines underwriting is the significant increase in fire risk. How can Renters Insurance agents rise to the challenge?
In recent years, the risk of home fires has increased. California Renters Insurance is particularly impacted by this risk, in light of recent droughts and the explosion of wildfires. This increased risk presents serious challenges for personal insurance. The mobility of renters presents an additional challenge, in that many millennials only purchase renters insurance for the time they’re required to have it while they live at a given property. How can agents respond?
Insurance companies have historically used every shred of data available to them in the interest of predicting risk. On the other hand, most insurance agents simply take the number offered by the rating system at face value and assume that they’re correct. In order to minimize risk in your policies, take the time to make sure the rating passes a quick smell test. Is that remote rented home in California really a protection class 2? If it doesn’t look right, dig a little deeper and get on the phone with an underwriter to make sure that the risk is being priced correctly. This can be the difference between a book that’s successful and a book that’s barely above water.
You have more data than ever before at your fingertips. Even the least technically inclined agent can learn to use Google Maps (and street view) to make sure there’s not an undisclosed swimming pool or a tumbledown shed that would qualify as an attractive nuisance on the property. You have both the right and the obligation to gather as much information as possible, and doing so will improve the quality of your book as well as your relationship with your carriers.
Proper Handling Of Binding Restrictions Due To Catastrophes
Depending on the carriers that you write with, you’ll find that some do a better job of communicating and enforcing binding restrictions when there’s actively a problem. Some carriers will just send you an email and depend on you not to write new business in areas of temporarily increased risk. Some carriers will update their systems to actively prevent the writing of new business in those areas. It’s ultimately on you as the agent to make sure that you’re abiding by those restrictions.
What if someone comes to you seeking coverage in an area that’s not technically under a binding restriction, but is likely to be so soon or when you know or should know that there’s an increased risk? That’s the time to reach out to underwriting, verify current restrictions, and make sure that underwriting is willing to accept that risk. Ultimately, as an agent of the company, you have the right to bind business on behalf of the company, but you also have the right and the responsibility to not bind business that’s outside of underwriting guidelines. Most companies will have something in the underwriting manual that encourages you to submit risks unbound if you know or have reason to know of a substantially increased risk.
You don’t want to be the one who writes a policy five minutes before a restriction goes into place. This, too, comes down to using the data available to you, as well as that provided by the insured.
Safety Device Discounts
This is a no-brainer – you want to write good business, right? One of the easiest ways to do that is to make sure you’re giving people discounts for protective devices and ensuring that the protective devices are in place and functional. If you physically lay eyes on the risk, maybe you can test smoke detectors as you walk past and take the opportunity to educate the insured that they should change the batteries when they change their clocks twice a year.
The converse to this, of course, is to make sure you’re aware of hazards. Are there burglar bars without a quick release latch? Some carriers won’t accept these at all, but it’s another great opportunity to have a conversation with the insured. Maybe they don’t know the risk inherent in such things, and it might even lead to a conversation about other ways the insured can reduce risk in their home.
Even if you’re not physically visiting each risk, you can still ask the questions. If they have smoke detectors, give them the discount. If not, ask why? Do they think the cost is too high? Often, older people have difficulty reaching existing smoke detectors to replace the batteries. In a situation like that, you can either encourage them to call maintenance for their apartment or encourage them to buy and place detectors where they will be both useful and within reach, or call a friend for assistance. That’s a great lead-in to ask whether they have a kitchen fire extinguisher, and just as importantly, whether they know how to use it. Once you start having these conversations with your insureds, you’ll find opportunities for both education and cross-sell. It’s a win-win for you and the insured.
Asking The Right Questions
Some insureds just don’t like to talk, or they place a high value on their privacy. Learning to ask the right questions while still respecting that privacy is a balancing act, but an important one. Just as important is learning the difference between someone who is naturally very private and someone who is outright cagey or trying to hide some material fact.
“Have you had any losses in the last five years?”
“I don’t think so”
That could be a big red flag, or it could be a very busy person who honestly can’t recall whether that wind loss was four years ago or five years ago. Probing deeper without crossing the line is an art, and it’s something you should practice frequently. One of the reasons this is so important is that many agents have a habit of mixing jargon into the conversation – can you reasonably expect your insured to know how “loss” is defined for these purposes? Chances are they’ll disclose that they lost their keys a week ago, but won’t know how that’s relevant. Or they might not know they need to disclose that they filed a claim, even though it was closed without payment.
Reports only go so far, your best source of information for rating a quote is an honest insured.
There are many other steps you can take to mitigate the risk, but it comes down to making sure you have all the information you could possibly need, and then some. Ask the right questions, don’t be afraid to run things past underwriting, and make sure you understand your market.
If you’d like to share how you help to mitigate increased fire risk in your agency, send your tips to firstname.lastname@example.org.