Getting to Know Insurance - June 2006
By Geof White
Part I
Finding the Right Insurance Agent / Agency
Before we discuss insurance needs, we will need to start shopping insurance agents. There are quite a few things to consider when looking for an insurance agent. Picking an insurance agent is an important decision. Like hiring a lawyer or accountant, this agent will need to advise you on how to keep your business safe and secure from potential problems.
Some facts about insurance agents:
1) They work on commission. They will sell you up if they can.
2) They are bound by many state rules & regulations regarding giving advice.
3) Each Agency will only have contracts with a handful of insurers, So shop around!
Here is a great example of what shopping insurance agents can do. When I was selling insurance a few years ago I found a potential customer that had been with one insurance agent for years. Annual Workers comp bill was $102,000. What the customer did not know is that the agent had no contracts with any Workers Comp insurers for their type of business. Therefore they were placed in the “State Pool” every year. I was able to write a policy for them with a different Workers Comp insurer for the price of $60,000 a year. Yes they saved $42,000 a year by switching! No change in coverage, just a lower insurance bill. Ironically, my insurers would not quote their general liability, yet they had good rates through their current agent. For that customer it was beneficial to have two agents.
A few other things to consider when interviewing Agents:
1) Does the agent/ agency only write business insurance?
Some agents / agencies offer absolutely everything; Life, health, Liability, Workers Comp and Auto Insurance. Some underwrite strictly business insurance only. You are probably better off with an agent that deals in business insurance and preferably contractors.
2) Is it a large agency with several specialists?
This is a great concept. A large agency may have a specialist for each type of insurance. With the theory of “not one agent for multiple insurances but one agency with several specialists; Thus providing the best of all worlds.” These agencies typically have more insurers under contract because they tend to be large agencies.
3) Do they charge for certificate requests?
Some do charge, some don’t. The latter is obviously preferred.
4) Does the agency/ agent have a good idea of what you are doing on a daily basis?
I would not feel comfortable with an agent that had no idea how window cleaning contractors work. Your agent will need to advise you on certain issues and if they have no clue in what you do; how well would that advice be?
5) Does the agency/ agent have access to multiple insurers?
Some agencies have several contracts with several insurers, therefore offering many choices. Other agencies may have a limited or single contract meaning they can only underwrite your application to that one insurer.
6) When they quoted you, was the Insurer rated A-, B+ or lower?
AM Best is an independent rating system that rates the financial stability of insurance companies. Ability to pay a claim is crucial- that is why we have insurance in the first place. The highest rating is A++ all the way down to C, D, E and a few others. Insurance is a business just like window cleaning. There are financially strong companies that are able to adapt to losses and others that are not. You will find different ratings in different insurance categories also. You will find some life insurance companies at A++. The highest you will find a Workers comp insurer is A-.
Here is a link to AM BEST that explains more www.ambest.com/ratings/guide.asp then scroll down to “financial strength ratings”.
7) Will they do things like MVR’s
(Motor Vehicle Records) & Background checks on potential employees for you?
Your agent has easy access to these records.
8) How do you get along with the agent?
Does the agent treat you the way you treat your customers?
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