Mechelsen, Inc. Risk Management Forum

Trends - Uninsured coverage not only for autos

Trends - Uninsured coverage no longer just for autos

Most consumers are aware of the risk that they may be injured in a car accident caused by someone who is uninsured.  This is why most consumers are wise and secure limits of insurance for Uninsured/Underinsured Motorist protection on their auto policy.  And the very wise, (see my blog entry from July 11, 2007) add uninsured motorist coverage to their excess liability (umbrella) policies. 

If you're smart enough to buy high limits of insurance to help fund the possibility that you could hurt someone else (the reason you buy liability insurance), you are surely smart enough to want to buy high limits of insurance to help fund the financial losses you'd incur if you get hurt by someone else (the reason you buy uninsured insurance).  Well now we're very proud to say that we had a hand in initiating and creating uninsured protection insurance for losses in addition to losses that might occur as a result of an auto accident. 

Want some examples?  What if you get serious hurt by someone while skiing and that person doesn't carry any liability insurance because they never thought it was important to buy a renter's insurance policy?  Who will pay for your losses?  What if your child is bitten by someone's roaming dog and is permanently disfigured?  What if you're accidentally stabbed by an errant steak knife at a restaurant?  Sound too "out there"?  These are all actual events where this new uninsured protection insurance would have provided coverage!

We expect this kind of coverage to grow in popularity as advisors and families see the benefit in protecting their financial position against things that happen to them just as much as they see benefit in protecting their financial position against things they accidentally do to someone else.  But we need to make a special note of thanks to Fireman's Fund who is the very first insurance company to take our idea and turn it in to a reality (being introduced in all 50 states).  I try to stay insurance-company neutral in this blog but their pursuit of this idea for the benefit of their clients is really outstanding, though not at all surprising given our experience with everything that they do. 

Mechelsen, Inc.        Darren McGraw, MBA, CRM, CIC         mechelseninc.com

Trends - No coverage for diminution of auto value

Trends - No Coverage for Diminution of Auto Value

Courts across the US have heard many challenges over the past few years to insurance company declanations of coverage for claims by policy holders that auto insurance policies should compensate them for the reduced resale value of their cars after a loss.  In most all cases the courts have concluded that beyond restoring an insured vehicle to pre-accident function, performance, and appearance, there is no contractual obligation to include compensation for any stigma of lesser value. 

Without citing the specific cases here, most all courts followed the same analyses of the contract and applied the plain language of the policy to determine that the insurance company defendant did not owe beyond the repair/replace language contained in the contract. 

Consumers will likely continue to expect their insurance to compensate them for either the real or perceived diminished value of their car, but there appears to be ample judicial support for insurance companies denying payments for those kind of claims. 

Mechelsen, Inc.                Darren McGraw, MBA, CRM, CIC            mechelseninc.com

Trends - Optional Excess Uninsured Motorist

Trends - Optional Excess Uninsured Motorist

Most financial planning clients get plenty of advice encouraging them to secure Excess Liability (umbrella) insurance.  The risk to net worth (both current and future) stemming from an actual or alleged claim of negligence is fairly easy for most planners and consumers to understand.  Insurance is a risk financing product, not a risk transferring product and most people understand that liability insurance only pays for the first $X of a liability claim.

Unfortunately, we see too many planners and consumers not feeling as strongly about securing Uninsured Motorist coverage to protect themselves against serious injuries caused by someone without insurance.  The statistics prove that there's a nearly-equal chance of an accident being caused by someone without insurance as one being caused by someone with insurance. 

If your client feels they have net worth worthy of protection against liquidation forced on them by a liability suit, it seems that they'd feel the same need for protecting net worth against liquidation forced by an injury and the resulting economic losses suffered at the hands of someone without insurance.  Fortunately, the industry seems to be making Excess Uninsured Motorist more and more available as an optional coverage added to an Excess Liability policy. 

Our observations suggest that for $1,000,000 worth of Excess Uninsured Motorist a typical family could expect to pay between $100 and $200 per year for this additional coverage.  This seems extremely affordable and a valuable wealth protection tool.  Remember, let the insurance company worry about the probability of any particular occurrence.  The consumer just needs to worry about the impact of severe losses and different ways of managing that risk.

Mechelsen, Inc.            Darren McGraw, MBA, CRM, CIC            mechelseninc.com

Commentary: Not Meant As Fear Mongering

Not Meant As Fear Mongering

We're sometimes accused of always carrying around a wet blanket just so we can throw it on everyone's party (and keeping a spare one in our car "just in case").  Perhaps an occupational hazard of being in the risk business is that you start to think of the "what-ifs" and the "maybes" for almost everything.  Just looking at a few stories on this blog may convince some advisors to never check back because it freaks them out.

We tend to look at it from a very positive angle, however.  Perhaps because insurance is never needed during the most fun times in life, most people use words like "have to", "necessity", "expensive", "irritating", "scary" to describe the insurance analysis, acquisition, and claim experiences.  But when you think about what the insurance contract does for someone in exchange for a small expense in relation to the total risk exposure, having the right insurance portfolio in place is actually LIBERATING!

Having insurance shouldn't make anyone less careful or concerned, but in the same way that you give comfort to clients by addressed their investment risk tolerance, providing them with the right insurance portfolio that addresses their risk exposure frees up concern and other resources which allows them to live a good life!  Ignorance is not bliss.  Knowing what to do and why to do it is bliss.

The accounts that we post here in this blog are not meant to be alarming, but are examples of how important attention and diligence are when having your clients' insurance portfolios reviewed.  Having the ability to identify what is unaccounted for in a client's insurance portfolio and then having the experience to actually go get what is needed should be a minimum requirement for anyone touching your client's insurance affairs.  If your insurance advisor can't prove to you that they know the smallest details of their contracts and the way they are affected by the real world, then to us THAT is alarming!

Mechelsen, Inc.             Darren McGraw, MBA, CIC                mechelseninc.com

Trends and Impact on Financial Advisors

Current Insurance Trends That Impact Financial Advisors

Over the last ten years we've seen the industry move from strong M&A motivation, to severe "hard market" underwriting, to deeply-discounted price competition.  While different companies react and respond to trends at different times, the pendulum eventually swings the same for all.

What I'm most pleased with is what seems to be an emerging trend of insurance carriers using their "product" as differentiation.  Instead of targeting market share or profit just by lowering rates or restricting underwriting requirements, many of the best insurance companies are investing more in "cafeteria"-style contracts where more customization of coverages is available. 

The benefits of this are obvious.  What your client doesn't need won't be forced on them.  And what your client does need may now finally be available where it didn't exist before.  The impact on you as their financial advisor is quite significant.  On the one hand, it's more likely that you can play a part in getting your client the risk management protection that is needed.  That's good.  On the other hand, now that more options are available you'll need to keep a closer eye on the marketplace to make sure you don't miss an important opportunity.  That's not so good.

Using an insurance expert as your firm's go-to specialist becomes even more important and even more advantageous as long as the expert you use is independent, has access to a large breadth of the market, and knows what they are doing.

Mechelsen, Inc.                  Darren McGraw, MBA, CIC               mechelseninc.com