Unfortunately, there are people in every industry, including the media, which should be taken out and shot for their behaviors.  We all know that there are also honest people that deserve real recognition for the honor they bring to their industry.  However, that doesn’t make a good news story.

I’ve been a critic of the level of education in Arizona’s insurance agents for a while now.  Most agent training revolves around selling, not coverage or product selection.  Find someone you trust and know has your interest in hand.  When that person is in front of you, you’ll know it in your gut.  Don’t be swayed by the product pitch of the day.  Stay with those you trust.

As much as I’d like to attack Allstate I won’t.  There are bad apples in every company and in every industry.

What can you do to protect yourself?

The Arizona Department of Insurance has great resources available to help consumers online.  Here are a few things you can find online at their site:

• Find insurance company complaint ratios
• Find information on insurance fraud
• View information about licensing on companies and agents
• Learn more about individual (personal) insurance
• Learn more about small business insurance
• Read a report on Arizona Health Insurers
• File complaints

As we become more crunched for time in our daily lives, it’s difficult to sift through the mountain of information available to make a decision.  It’s important for you to have an agent you view as a trusted advisor and looks after you.  You don’t want someone just pitching the lowest price or the product of the day.  Your business and personal financial health and well-being depend on them.

I have to say I was a bit stumped.  I didn’t understand and then it hit me.  I replied, “We’re not an insurance company.  We’re an Independent Insurance Agency…”

So, what is the difference between the insurance companies that are on every corner and an independent insurance agency?

The insurance agent on the corner just works with that one insurance company.  They have a line of products from the company that they’re allowed to sell and that’s all they can offer.  The insurance company builds their brand by advertising heavily and placing shops with their logo on every corner.  You trust the agent because you know the company name and logo on the door.

An independent agent works with many insurance companies.  They have many products to choose and shop from.  They can help customers in more ways.

For example, one auto policy may offer incentives/rewards to teen drivers that are accident free.  Another offers guaranteed replacement cost on your home while most only offer a percent “extended” above the dwelling amount listed on your policy.  If you have different concerns than your neighbor an independent agent can find something that meets your specific concerns.

Also, as I told the man on the phone, “If you’re with a company on the corner and their rates increase, you have to call around to shop.  What if the company stops selling home insurance in your state as they have in other states?  Now, you are forced to break the relationship with the agent/agency. When you’re with us and your rates go up or a company changes its appetite, give us a call. We can shop the many other companies we work with and probably find what you want.”

What about claims?  Since the agent doesn’t handle the claim, you have to rely on the stability of the insurance company.  Just because an insurance company has agents on every corner doesn’t guarantee better claim paying or service.  You can find complaint ratios for insurance companies by calling the Arizona Department of Insurance or visiting their website.

There are many variables to choosing what’s right for you.  You have to think, “what do I want?”  Do you want the control, freedom and options and independent agent offers?  I left the captive agency system because I wanted to offer more to my clients.  I’ve seen both sides and both have their challenges. However, at the end of the day, I go home feeling great now knowing I’m doing the right thing for my clients.  Then again, I’m biased towards independent agents because I am one.

There is an endorsement to help protect against this additional cost.  It’s call ordinance or law coverage. It may be called building ordinance, building code, or other similar name depending on the insurance company you’re using.

So, what’s the big deal?

Well, building codes change. . .Often.  Since the increased cost is not covered in your base home insurance policy this optional coverage adds coverage for three common building law requirements: demolition of the undamaged portion of a building, the increased cost of construction required for superior materials, and cost to clear land of debris after demolition.

Here’s an example.  Just over 50% of a home is destroyed from a fire (or any other covered loss, it doesn’t have to be just fire).  The base policy would only pay to rebuild the damaged portion.  Without this endorsement you would have to pay for:

• The cost to demolish the rest of the home, where required by law.
• The cost to clean up the land after demolition.
• The increased cost to rebuild with superior material because of changes in building codes (examples could be needing to add fire sprinklers, upgrade electrical wiring, upgrade plumbing, etc.).

This is an optional coverage.  Don’t assume it’s in your policy.  If you don’t see it on your policy declarations page, ask your agent why.  If they don’t know what you’re talking about, it’s time to find another agent.

There are companies that sell via internet, toll-free 800 numbers, through associations, and whatever manner they can . Insurance companies think if they cut out the agent their distribution costs are less. Many consumers like this option. That’s fine.

The more I see of these companies tactics, the less I like what they do. As a consumer, you need to be aware. We’ve had customers tell us they shopped and found better rates at some of these companies. When we compare coverage, the direct insurance companies often only give state minimum liability limits and remove important coverage options.

Imagine having an accident and finding out you’re not covered adequately for the lawsuit against you, you’re not covered for the medical bills, and you have to pay for your rental car.

One company’s website has an option for ‘lowest price’ when shopping. If you click that option it automatically defaults to minimum liability limits, doesn’t include common coverage options which creates gaps for many customers.

Anyone can remove coverage to lower rates. I’ll say it again and again…

“THE REAL COST OF INSURANCE IS THE PREMIUM PLUS THE COST OF ANY UNPAID CLAIMS!”

A good, knowledgeable agent can save you thousands…not only at claim but at policy inception too. When we go back with the customer and add in all the removed coverage options, the insurance companies we represent are usually less expensive than these direct insurance sources.  And, you get an agent.

Buyer beware when using direct shopping companies. You have no recourse when you make the mistakes.

When quoting policies all day we seem to run into the same mistakes from other agents over and over. It’s little coverage options like building ordinance/code, jewelry riders, water backup, personal injury liability, recreational vehicles/ATVs, boats, the list goes on. Missing one could be a huge cost to you when a claim occurs.

Now, you may be thinking, “Well, you’re just trying to sell me more insurance.” And, you would be right. However, wouldn’t you rather have the coverage at claim time? Wouldn’t you at least like to have the opportunity to accept or reject the coverage? Often the coverage missing is only a few bucks a year, maybe $10, $50 or $100 more to add and it will give you $1000, $10,000 or $100,000 in protection.

Unfortunately, since there is so little education required in the insurance industry most agents don’t think about it. Insurance policies are constantly updated, exclusions are added or changed. And so many agents don’t really understand what’s there. They quote what you said because you just want the lowest price. Right?

I can’t imagine the anger someone experiences when the claims adjuster says, “If you read your policy you would know it’s not covered.”

Be careful and remember, your agent only needed to pass the test with 70% to earn an insurance license…10 years ago.

It’s funny how almost everyone we talk with starts going down a list of things that may or may not qualify for discount.  They’ll say they qualify for various discounts because they have OnStar, Low Jack, taken driving classes, multiple cars, home and auto/multiple policies, home alarms, a pit bull to eat any burglars, the list goes on and on.  While some of those do qualify for discounts, and every insurance company has its own set of discounts, those generally make a small impact on price.

There are two keys that I’ve found critical to the best rates:  your credit rating and an independent agent that can shop for you.

Almost every insurance company now uses credit as some form of rating for your personal home and auto insurance.  In fact, many have been using it for over 15 years.

Not all insurance companies call it credit; some call it financial stability, financial score, tier rate or something else.  And, for most companies, you won’t see it listed as a discount.  You won’t even know how it relates to the price because it’s built into the rating tiers.

How much of a price break will excellent credit give you?  Since every company is different in how they use credit, it can vary drastically.  However, we’ve seen prices for top credit tier being less than half of the worst credit tier.

So, why is credit used?  Here’s what I’ve been told:

• “There is a direct statistical relationship between credit rating/financial stability and losses made.”

Is this true?  I don’t analyze the statistics.  I don’t have a clue.  However, I have seen this to be somewhat true in our agency and with claims of our clients.  All I can say is improve your credit and drastically lower rates.

I’ll go into how an independent agent can shop for you and find you the best rates in another post soon.