It was fortunate that the damage was comparatively minor…the repair shop ended up charging a minor $400 to unbend the metal (or whatever composites they use in this day and age) and repaint it.

But, it did leave me a bit annoyed at the idea that I’d be out any money (and could have been out much more).  I would have loved to argue that the bar’s GL policy should have kicked in, but the reality of pursuing that for a small dollar amount at a bar I actually want to go back to in the future was not in the cards.  Regardless of their culpability in having a dark parking lot, dangerous parking lot, or any other argument really gets outweighed by the basic social premise that I didn’t want to destroy my relationship with the bar owner over $400.  I think many of our clients sometimes miss this bigger picture that there is a cost to just ‘existing’ in life and maintaining relationships we want to hold.  There is a gap between the “paper legal & financial” instruments we put in place and the reality of how we use them.

Isn’t that what life ends up being about?

Historically, it the hard market / soft market is cyclical and every “x years” we see a shift.  However, the last 8 years (depending how you count) or so has been soft.  We’ve all been waiting for it to turn, but with the economy in the basement, markets were soft, and prices stayed low.  We are finally starting to see it turn.  Travelers and Hartford have both significantly tightened pricing in the last 6 months and they’ve simply started non-renewing more than usual.  Even the captives are getting in the mix.  Look at this comment from Farmers where they will be jacking rates up 10% or more in Texas.  So, with this impending hard market, what can you as a consumer (individual or business) do???

Unfortunately, it is the same answer as most of us preach:  you have to find a “skilled” broker.  Hard market turns are where ‘sloppy’ brokers are outed because they can’t just run a quote and know it will be cheaper than a quote run last year.  This is where finesse, relationships, and market access actually start to matter.  If you are with a Captive Agent (Farmers, State Farm, Allstate, and similar), once they start to increase rates, you are stuck because your captive agent can’t shop other markets.

This is the time, more than ever, to go seek out a well qualified, experienced, and knowledgeable independent broker.  When times get hard, you’ll be thankful you built a solid relationship with someone that will fundamentally care about you because he/she knows that you will work with them when the market one day softens again (and not run to an agent that is 72 cents cheaper).  In soft markets, shopping matters, but in hard markets relationships matter.  Make sure you build a relationship with someone that will go out and fight for you.

Insurance policies are specialized legal contracts.  They can be long and wordy and many agents and consumers rely on graphic summaries of policies that gloss over many of the finer details.  The old-school value of sitting through a detailed reading and understanding of the insurance products being sold is much less frequent.  The question I pose is if a broker doesn’t have a clear understanding of every piece of an insurance policy, how can they properly advise a retail client?

Interestingly, when I was chatting with Mark Boeker (the class trainer), it turns out that Germania is considering cutting the class time by 60%.  Perhaps their expectation, like other carriers, is that practitioners will gain the same information via self-study.  Idealistically, I buy that.  Most professionals (lawyers, doctors, etc.) do that and is why they are termed ‘practitioners’.  In reality, I’m less convinced.  A lot of business is transacted on speed and relationships (not necessarily a bad thing, mind you), but there has to be the underlying knowledge as well.

Consumers:  If you do nothing else with your insurance, take 2 hours out some night and pull out your homeowner’s (or renter’s) policy and read it.  Seriously and intently read it.  Call your insurance advisor (broker, agent, whomever) and ask them a few questions…ask them to go through it with you and make sure you know what coverage you are paying for.

As any experienced operations person will tell you, after the deal is signed, the hard work actually begins.  The success of post merger integration (PMI) ends up defining whether the deal was a good one or not.  We are in the midst of converting computer systems, phone systems, carrier systems, and most importantly branding.  It got me thinking a bit this weekend about professional service acquisitions.  Whether it is a medical practice, dental practice, financial service house, insurance practice, or anything similar, what’s really being purchased is the access to an existing client base and the will of the clients to accept a new company (even if it is the same employees) servicing them.  It’s all about the messaging and branding to these clients to keep them more comfortable staying than shopping for another broker.  Unlike a physical asset that you can touch, the purchase of an agency depends so much on our ability to quickly communicate with and make customers feel good about doing business with us.

We’ll have a joint letter go out to clients, press releases, and similar.  However aside from those and stuff we do to take care of our customers on a daily basis… are there any special thoughts, techniques, or practices others of you have successfully used?

I have long been advised, and equally believe, that you can never win by mixing either politics or religion in a business setting.  There are just too many view points and too much emotion surrounding the topics.  Without taking a viewpoint, however, on whether someone should support same-sex marriage, I’ve had an interesting client enter our office this week.  She is in a long term relationship with another female.  Here, in Texas, same sex marriage is neither legal nor recognized from other jurisdictions.  On the other hand, strictly from a risk characteristic, does the “entering into a committed relationship” with another person equal the same sability, maturity, and risk averseness of a conventional married couple?

As State laws continue to diverge from each other, National carriers have to be grappling with this same question.  From a strictly business stand point, does the entry of a gay couple into a relationship, convert to providing car insurance discounts.  While I’d argue it does, I have yet to see any of our major carriers switch their risk profiling to capture this demographic.

We’ll push by phone and directly with underwriters to make the case for our particular client….but I do feel like it is only time before uniformly carriers begin providing insurance discounts to unmarried couples in States that don’t recognize such unions.

Since this ranch was older than dirt, the stables wouldn’t be covered at anything more than ACV by any legitimate market.  I told him to forget the property coverage.  He was surprised at my comment.  It was an automatic response from him: “I have property, I need to insure it in case something happens to it.”  But we sat and chatted…and I reminded him of the fundamental rule of insurance…it’s just transfer of the risk…what is the risk here?  The cinder block wasn’t going to catch fire, freeze, blow away, or anything else unless we had some crazy once in a million tornado.  And, if that really happened, the values would be so under-insured at ACV that it just wasn’t worth it.  What’s the risk?  What do you think could possibly happen to these things that would cause you to give me a big chunk of money?  Forget it, I told him.  Now, we got some good liability coverage and good contracts for the horse owners that were boarding their horses there….because, at the end of the day, those are real risks that you want to protect yourself against.  It gave me a great chance to talk with him about risk transferring: those you want to financially, those you want to with legal contracts, and those you’re just willing to take on because it isn’t worth the premium.  It’s unfortunate that I think there are too many folks out there who don’t think through the underlying purpose of insurance when shopping.

So few people buy flood insurance (us included for now) that it can be mind boggling.  Some argue that the chance of a flood actually happening is so small, that it isn’t worth it.  But then again, some policies folks buy insure against falling objects such as aircraft.  After all, that is the point of insurance–it isn’t supposed to happen–it is insurance in case it happens.  I’m not sure there is more likelihood to be hit by a falling airplane than a flood. 

In our case, it just isn’t something we focused on for ourselves.  Perhaps this is a case of the cobbler going without shoes.

Many people start with homeowner’s insurance when their lender requires it at closing.  Since flood insurance is underwritten by the National Flood Insurance Program (aka, Federal Government), it requires an extra purchase from a broker.  Therefore, it usually isn’t purchased unless one buys a house in a defined flood area, where lenders will require it.  But what about those areas that aren’t required?  That is, after all, what happened to our friends in New Jersey.  And, for anyone that dares say “it won’t happen here”, we only need look back to 2006 when torrential rains led to significant flooding in areas of El Paso that previously couldn’t be imagined.

That is the point of insurance.  It protects you against the unexpected.  In areas where it shouldn’t flood, it makes even more sense because it is so cheap compared to the damage a flood might cause.

After a good, heartfelt conversation, my wife and I decided that in addition to stocking up on a few emergency sandbags, our budget could afford the couple of bucks a month that would help us rebuild our house (and lives) if it ever started flooding again–yes, even in a place like El Paso.

The truth is that it is one of the safest cities in America and boasts a fantastic mixture of commerce and activity.  El Paso hosts a medical school, multiple large publicly traded companies, a division-1 university, a huge military presence, and plenty of commerce, industry, and manufacturing.  It also is one of the few cities that survived the 2008-2009-2010+ economic meltdown relatively unscathed and is actually growing.  Its diversity provides a resilience to the risk other cities have seen.

I’ve found that it also provides a great diversity of insurance needs.  While you can find great specialization in some geographies (financial services in New York, technology in San Francisco, wet marine in Florida, etc.) El Paso’s commercial insurance market is pervaded by broad based, retail generalists.  I contend that this requires brokers to understand inherent risk in the business world across industries.

Insurance is not fungible goods. That’s why it doesn’t come in vending machines. Neither do wills, trusts, good investments, retirement programs, etc. These are important and critical financial instruments and must be put together by competent, knowledgeable individuals – not a website.

Many people argue that “simple auto insurance” is an easy commodity to buy online.  Do you have the ability to (or know how):

• To obtain and review a policy specimen
• Know and understand the difference (and implications) of a CSL BI/PD or whether that is even available as an option
• How about PIP or Med (or appreciate the difference and which one(s) is legal in a given state)
• Can you purchase a stated amount

These are all questions on just a “simple auto policy.”  Insurance is a series of contracts which can be customized and tailored to suit a certain set of financial needs.

The most ironic thing is that with the pricing structures in place, shopping through a Trusted Agent (Independent Agent), the price point is usually the same or cheaper as compared to shopping online, and as a bonus it comes with a “free expert” to help educate you about the right product.

<special thanks to Darald Novak for some of the thoughts in this post>

It is the same in insurance.  The challenge is that, regardless of how much some folks insist, insurance products really aren’t commoditized.  Sure, products at the lower end of the spectrum, such as a basic (state minimum) auto policy can really be shopped as a commodity, most reasonable and more sophisticated insurance products can’t be thought of in such a manner.

At the end of the day, insurance is no more than a legal contract binding certain payments to occur upon certain events.  The consultation of the right contract is usually undermied by the client trying to find the cheapest product.  While some agents, brokers, and advisors can certain source cheap, value appropriate products, the client is subscribing to the consultation of that agent!  It almost begs the question sometimes…which is more important:  the product, or the advise that led you to the product.

I am often amazed at the confidence some customers have in their own abilities to understand some of these products that even I have to spend a lot of time studying.  Our profession needs to do a better job of educating others about the value of consultation beyond just the product.  My experience with Mt Franklin Insurance has been partially with an effort to work towards this consultative manner so folks know what they actually need (and what they are getting).  But, it does seem to be a long road.