Archive for the ‘Insurance Stuff’ Category
How do I start a conversation with my clients about cyber liability?
By Ken Kukral
One of the toughest conversations to have with a client is the conversation where you are trying to get them to consider a coverage they haven’t had before. The clients first thought is that if I haven’t needed it before, why should I buy it now? Or they think you are just trying to sell them more “stuff”. They probably already feel they are “insurance poor” and why should they spend more of their hard earned money on insurance.
The “new insurance” conversation for cyber liability is one you need to have with your clients. Both first party coverage and third party coverage should be discussed. While newer (in relative terms to my 26 years in the business) coverage such as EPLI has become pretty much standardized with only a few “bells and whistles” to differentiate the different policies, cyber liability is a wide open area. It is tough to do side by side comparisons since many of the carriers use different language, have different names for each of the coverage parts and have are very specific in their exclusions. All this can make your head spin, so what are you to do?
Well, my recommendation is to approach this “new coverage” discussion with your client in the following manner:
1. Familiarize yourself with the coverage. You do not need to be an expert to be able to sell this coverage.
2. Set up a checklist of questions to ask your client to assess their exposure to “cyber liability”. It is hard to “sell them” if you don’t have a good handle on what their exposures are.
3. Probe on what they feel their exposures are or what areas cause them to lose sleep. These are probably the most important pieces of information you need to gather. It will also help when approaching carriers to tailor the coverage to fit the client’s needs. You can better explore the “bells and whistles” of the different cyber liability programs in line with what the “hot buttons” are for your client.
4. Make sure you keep the discussion with your client at their appropriate technology understanding level. It will be very different when you are dealing with a technology savvy IT Manager versus a more paper and pencil CEO. Start to get too technical with a technologically illiterate person will only make their eyes glaze over.
5. Be prepared to discuss some of the regulations that they are required to be in compliance with. Some of these include the Red Flag Rule, Industry specific privacy regulations, state specific notification regulations and data breach regulations. Also discuss the trust their clients put in them to make sure their information is secure. For positions such as accountants, lawyers and insurance agents the “trust factor” standard is even higher. This coverage is there to help them recover from these type of information disasters.
6. You need to commandeer the application through the organization to get the appropriate person to talk to in order to get the information needed. This may include the CFO, IT Manager and Network Manager. Leaving an application for them to fill out will not work in this situation. Give them a deadline when you would like to have it back…. Since I am sure they are busy people.
7. When selecting markets to approach, try to find the one that best fits your client. Some programs are geared towards specific industries and have been tailored to fit their exposures. At max, you may want to approach 2 or 3 markets. Any more than that and you will have trouble comparing the options since they are numerous. Ideally you want to present one recommendation. More than that and you will have to be able to explain the differences between the two programs to the client and some of those differences can be minute and very technical.
8. Be able to give some loss examples for each of the coverage parts. You may want to give one loss example that spans over a number of coverage sections and show the potential costs that can add up in these kind of losses. If possible find a loss in their specific industry. This will help it to hit home.
9. Close. If you have done a good job of uncovering their exposures, the type of losses they can have and how this coverage could save their business from financial ruin, they should be ready to buy.
Don’t wait, if you don’t talk to your clients about this coverage, someone else will or they will read about it. If you are looking out for their best interests, you need to discuss this valuable coverage with them.
Over half my life I have been in Insurance, so what have I learned?
By Ken Kukral
As I look back at my 26 years in the excess and surplus lines business I have a lot of fond memories. The insurance industry gets a bad rap as a potential career and it surprises me that more people don’t choose it as a career path. My observation is that most people in the insurance industry sort of “fell into it” and very few went to college looking to major in insurance. I have found it really is a great profession and we need to improve the image that we project as an industry so that we can attract some of the best and brightest coming out of high school and college.
I hope to continue my carrer in insurance for quite some time but I thought I would share with you what I have learned so far:
1. Details DO matter! – The single most important lesson the prior owner of the company imparted on me was that details were extremely important. Little errors could become huge problems. A missed endorsement, a decimal point in the wrong place or a missed phone call could change everything. When you consider we are non-lawyers, selling contracts it is important to take care of the details.
2. Education is a never ending quest – There are so many details in this business that a thirst for learning on a daily basis is crucial. I know maybe a handful of professionals in this business, that are in the top tier of knowledge capabilities and many of those are near the point of retiring. You have to keep improving your craft just like a world class heart surgeon would. You wouldn’t want to have bypass surgery with someone who has not kept up on the latest in cardiac surgery, would you?
3. Ethics are critical – It only takes one time where you stray to “the dark side” and your image will be tarnished forever. Do the right thing, even if it is not the easy route to go. Insurance Departments see this as such an important area that many of them have implemented continuing education requirements that include ethics training.
4. Never stop asking questions. - Both from an educational standpoint and from the standpoint of your clients. When you ask questions you learn. Asking questions also shows a level of interest and will be noticed by other insurance professionals and clients alike. Besides, no matter how long you have been in this business you still have more to learn.
5. Surround yourself with great people. – While this could go without saying it does need to be said that great people will help you to stretch your capabilities, challenge you do your best and will also result in the phenomena of “the whole is greater than the sum of the parts”. Together you can achieve more than you could do individually.
6. Keep looking for a “better mousetrap”. – Look to continually refine your skills, automate whatever you can and increase your productivity. Continuous improvement should be a driving force since you can never rest on your laurels. When you close your eyes and ears to new ideas you risk being left behind. Change sometimes happens at the speed of light and you can get left behind by trying to do things the same old way you always did them.
7. Think outside the box. – This is so very important in the excess and surplus lines area. We are called on to provide solutions for the risks our retail agents bring us. This is truly where we can be “adding value” to the transaction and prove why we are needed. Many times there is more than one way to get something done and the more open you keep your mind, the better able you are to come up with those innovative solutions.
8. Legislation/Regulation & Compliance – An understanding of the “playing field” we operate on is important. Getting involved with pending regulation and legislation will allow you to help “set” the playing field you and others will operate under. Compliance cannot be underestimated and are some of the “details that matter” that I mentioned in #1 above.
9. Give back – This may be more of a minority view in the insurance industry, but I think you need to “give back”. You need to help others via education, mentoring or encouragement so that they can build their passion for this business. The insurance industry does not just happen within a vacuum and it is important for people to help the next generation of insurance professionals so this industry image continues to improve.
10. Risk management and loss control knowledge is sorely needed. This area of the business has become somewhat of a lost art. I have a belief that your clients need your help in order to improve their risk profile and expect and appreciate your advice and consultation. This is an area that is one of those “value added” type services that distinguish you from other insurance professionals.
11. You need to manage expectations. Finding out your clients expectations can be the difference between satisfying them and building a long term client relationship or losing a client. This is not to say that the client’s expectations are in line with what you can do but it would help to know them. If you can’t meet them, it is better to know up front and not wait till you have expended significant time and energy.
12. Figure out where you fit in. – Based on your skills, personality and long range plans you need to figure out your career path. The earlier you can learn what you really want to do, will allow you to excel sooner. What do you still have to learn? What skills do you need to enhance? Who can help me achieve my long terms goals are all important questions to contemplate.
13. Develop a couple of specialties. – Everyone wants to be seen as an expert in some area. What area do you specialize in? Whether it is learning your agency management system inside and out or specializing in a particular industry, you will be rewarded long term for these efforts. Who wants to be “average” at everything?
14. It is all about trust. Trust with your carriers, trust with clients and trust with your co-workers. It takes a long time to build but only one mistake to tear it all down.
15. You need a mentor – Have someone you can call to run things by? New ideas, a problem or your frustration with a particular matter can all be areas you could discuss with a mentor who will help guide you on the right track. Sometimes you are too emotional on an issue or too close to a situation to stand back and determine what path you want to take.
16. It’s all about the people. – Relationships are “key” to getting things done. Sometimes it is not what you know, but who you know. Make sure to never “burn a bridge”. I find out on a regular basis how “small a world” it is in the insurance business.
17. Balance.- A lesson that is more recent for me. Health, work and family don’t just happen. They need to be a priority and need to be worked on daily, but need to be kept in balance.
18. A quick “no” can be better than a long term “yes”. – If you can’t do it, that is OK. If you say yes, then follow through and get it done. Your “word” depends on it. It has taken me years to realize I can’t do everything and I need to pick and choose what I can do best.
19. Return calls promptly- This goes without saying because the business world has evolved towards the expectation of more immediate responses. This includes e-mails and other forms of communication.
20. Enjoy the ride – I used to forget that you only live once. Once the day is gone, it is gone. Make the next day more productive and move you towards the goals you have for yourself.
And I still have so much more to learn and experience….
Additional insured status for professional liability, why or why not?
By Ken Kukral
It is quite common for contracts to have insurance provisions. Those provisions may require the party signing the contract to have general liability, professional liability, workmen’s compensation or pollution liability. Included in those provisions may be a request for named insured or additional insured status so as to indemnify them in the event of a loss. The client may assume that being included as a named insured, or additional insured, provides them further protection should a claim arise relevant to your relationship. This may be true for some forms of insurance, but it can be exactly the opposite for a professional liability policy.
So should you name the other party on your insured’s professional liability policy? In most cases the answer is no. The reasons are:
1. The client does not have the exposure that the policy would cover. Take for example if one of your insurance clients asked to be named as an additional insured under your insurance agents and brokers professional liability insurance policy. Covered services would be for acts as insurance agent or broker. Since your client is not acting as an insurance agent or broker they would not have any coverage since the professional liability is limited to “covered services as defined in the policy”. Since they are not acting as an agent they would not be afforded coverage.
2. Most professional liability policies have an “insured versus insured” exclusion. An additional insured would also be an insured so they could not collect from another insured.
3. Professional Liability policy does not make indemnification to the insured (you). Instead, the Professional Liability policy pays on behalf of the insured in the event that insured’s negligence, in rendering professional services, results in damages. Your client, is not the one rendering professional services, and therefore, does not assume the risks that your professional liability policy is designed to cover.
4. Conflict of interest. If the certificate holder names the insured in a suit, both the certificate holder (additional insured) and the insured could not be represented by the same law firm. Hence the reason for the insured versus insured exclusion (#2 above)
Are their exceptions? Yes. Those may be:
- A carrier may attach a “vicarious liability” endorsement that includes your client as a named insured, but only for vicarious liability resulting from services provided by you.
- Your client may have the “exposure” An example might be where an engineering firm was working with the County Engineer on the design of the water and sewer system for a new development. In that case the client DOES have an engineering professional exposure and they might want to be an additional insured under the independent engineering firms professional liability.
So what should you do when your client comes to you with a request to add an additional insured to their professional liability policy?
A. First, bring full details including contracts, and/or statements of work, in order to explain to the underwriter the circumstances for consideration.
B. Get involved. Help negotiate this provision out of the contract. Explain the issues this causes, how it negatively affects coverage and why this doesn’t protect them any better if they have this endorsement. Getting to the bottom of “why” they want this endorsement will help you to show that their request does not actually do that.
C. Look at other solutions to the resolve the problem posed to you by the certificate holder. Additional insured endorsements to not resolve all situations. For architects and engineers a project policy may be a viable solution.
D. There are other circumstances when underwriters may provide AI endorsements on a case-by-case basis. Circumstances where there is a very clear vicarious liability exposure to third party because the additional insured is hiring the professional to do 100% of the professional work or the professional is doing the work in the name of the additional insured as in design build projects. In these circumstances, the additional insured is hiring the insured and the exposure to the additional insured is the work of the insured. Nevertheless, in these instances it is more likely that the additional insured will be sued for the actions of the insured. Most underwriters can be persuaded to extend additional insured protection to the additional insured in these rare circumstances. Make sure to amend the insured versus insured endorsement if the additional insured is granted.
Tread lightly when you get these requests. How you handle these type of situations, can weigh heavily with your client. They are more interested in getting a contract, starting a project or getting paid and telling them “no”, it can’t be done can drive a wedge between you and your client. Getting involved with the party requesting the AI or working with the insured’s legal counsel to negotiate this provision will help resolve this matter to a successful conclusion. Dig deep enough to determine if this is one of those rare situations where some sort of additional insured makes sense and can be negotiate to not negatively affect your clients coverage.