I know that the first thing you do when you receive your policy is to sit down and read it. NOT!!
So, I thought I would give you an overview of what that insurance contract includes. In other words, use the KISS principle to explain it.
Insurance is a contract between you and your insurer and believe it or not, there is no such thing as true “All Risk”. Insurance is not, and was never designed, to cover everything! Generally, all insurance contracts include the following sections with conditions, exclusions and limitations:
- Declaration’s page – describes, who is insured, when, amounts of insurance and premium
- Insuring agreements– what are you covered for
- Exclusions – what’s not covered
- Conditions – Certain requirements or conditions that are required for coverage to be valid
- Definitions – Words that have clearly defined meaning for your contract
- Warranties – Things that you must do or you may not have coverage
- Limits and deductibles – How much insurance you have and what is your share.
- Endorsements – changes to the above
- Signature clause – Signature of the official signing to the agreement
You have rights in that contract.
You also have responsibilities as required by law under the Insurance Act of Alberta. These are called Statutory Conditions and must be included in every property or casualty policy issued in the province of Alberta. There are additional Statutory Conditions for Auto Insurance, many but not all of them, are similar. We will talk about the Auto Insurance Stat Conditions in a future blog.
- MISREPRESENTATION – Don’t lie or tell a part-truth to an insurance company. If you do, they can void your policy or rightfully refuse to pay a claim.
- PROPERTY OF OTHERS – You can’t insure something you don’t own, have a financial interest in or have assumed responsibility of.
- CHANGE OF INTEREST – Insured losses occurring after an assignment due to bankruptcy, insolvency or change of title by succession, operation of law or death are covered.
- MATERIAL CHANGE – If any conditions of your situation or property changes, you need to tell your insurer. If you aren’t sure, ask.
- TERMINATION – A contract can only be cancelled by you on request at any time or by an insurance company giving written notice. Certain penalties may apply if you cancel.
- REQUIREMENTS AFTER A LOSS – No don’t just walk away. You must:
Right away tell your insurer when and how it happened
Provide a proof of loss (your insurer will give you a form to complete)
Prove the amount of your loss.
Co-operate with the insurer and provide them the records they request.
- WHO MAY GIVE NOTICE AND PROOF OF LOSS – If you can’t provide or don’t provide the Proof of Loss, it can be given by your agent (under certain conditions) or any one to whom some or all of the insurance money is payable.
- SALVAGE – You must protect your property from further loss or damage after the occurrence and the insurer will help you pay for it.
- ENTRY, CONTROL & ABANDONMENT – The insurer has right of access to your property but they can’t take control or possession without your consent and you can’t just walk away from it.
- IN CASE OF DISAGREEMENT – This one is important! You have the right to a dispute resolution process prescribed by the government if you don’t agree with the amount the insurer will pay to repair or replace your property. Here’s some more info for you – Insurance Complaints
- WHEN LOSS PAYABLE – The insurer has 60 days to pay you after you file your Proof of Loss.
- REPAIR OR REPLACEMENT – Unless you have entered the “Dispute Resolution Process” outlined in item 10, the insurer instead of paying you, may repair, replace or rebuild and must start within 45 days of you filing your Proof of Loss.
- NOTICE – Written notice can be delivered or sent to the Head Office of the insurer in the province. The insurer must reach out to you at the address shown on your contract.
Now comes the fun part. You can’t take this to the bank or the courts. This is the condensed version of the Statutory Conditions to help make it just a bit easier. If you want to know more, then read your contract, talk to your insurance provider or better still call me!
I’m always happy to help you decipher the legal jargon in your contract. Reach out to firstname.lastname@example.org or 587-597-5478.
Sitting in a waiting room the other day, I struck up a conversation with a gentleman (let’s call him Bob).
He was waiting for his fiancé and the conversation eventually turned to what we did for a living.
Bob’s company, where he had worked for many years had just closed down, leaving him unemployed. He wasn’t sure what he would do yet but said he might be able to semi-retire as he had a skill-set developed over the years in Safety that could be part of a new consulting practice.
I was happy to share that I had been in the general insurance business for many years specializing in commercial clients. In addition, I consulted with a couple of industry stakeholders helping consumers deal with misunderstood and contentious insurance issues.
So, what would his reaction be? Would it be the inevitable negative response? “Oh, insurance companies never pay.” “They make tons of money.” “They are just here to rip us off.” I wasn’t surprised when his response was the “tons of money” response. Another comment he made was “insurance is just insurance”.
To that I replied that he was not alone in how he felt because as far as I was concerned, sometimes our industry does not do a good enough job of explaining the whole “insurance” thing to the consumer. The conversation revolved around a number of factors after that but let me share some of those with you.
“They make tons of money”
Yes, insurance companies make money. That’s the whole idea of being in business, isn’t it? Whether you are a business owner or an individual you need to make money to survive. The insurance companies are no different. It’s really not about making money though. It’s really about how much is too much? What amount of profit do you feel is an acceptable amount?
The one thing Bob didn’t know was that insurance industry statistics are readily available.
I thought an overall industry-comparison might be helpful.
- According to Statistics Canada “From 1996 to 2000, the average annual rate of growth in operating profits was 10.5% compared to 10.3% earned between 1991 to 2000.”
- The entire Property & Casualty Industry based on IBC 2020 Facts in Canada from 2013 to 2019 was 7.5%.
And finally let’s take an example from a report I found on line from Macrotrends
” Royal Bank of Canada net profit margin as of January 31, 2021 is 20.19%.”
“Insurance is just Insurance”
Bob’s comment was interesting. What is insurance, I asked? Well, it’s something that takes care of you when something happens. It should cover everything.
Yes, and a car is just a car. Right? Not if you ask any car buff. Normally if you go to buy a car you know the manufacturer, model, year, options and all the other “car stuff” so you know what to ask for and it’s a lot easier to compare the price.
Insurance is not just insurance. It’s a contract with different……
- (manufacturers) or “insurance companies”,
- (models) or “coverage” and
- (options) or “endorsements” available.
The consumer doesn’t normally know the difference and our industry has to take some of the responsibility for that. For many years, price has always been one of the main factors that we focused on. So, when most people buy insurance that’s what they ask for – insurance. That’s when price becomes the determining factor.
The Broker selling the insurance may not take the time to explain the different coverage and options available either because he/she doesn’t know or it may be because “making the sale” is the most important thing.
Don’t get me wrong. There are a lot of dedicated, educated insurance professionals in our industry who truly care about their clients. Just make sure you vet your provider. Check this out! Goldilocks and the Three Bears Insurance Brokerage
The world is changing rapidly and insurance is no different. Our industry focus changes, contracts change and people move from one job to the next. I plan on being around for a few more years as I’ve enjoyed the industry. I learn something new everyday most of which comes from dealing with the consumer. That’s why I’m here. What I do is important. Can you just imagine what our world would be like without insurance? Not sure? Check this out. What if Insurance Didn’t Exist?
Remember I’m always here to help and answer any questions you might have.
Heather Cournoyer, CCIB, CIP Get in Touch
Most consumers have no idea what I’m talking about so let me share a story with you.
A few years ago, a large commercial business owner wanted to “test” me out to see if I could compete with the large insurance brokerage firm that had represented him for years. He had just completed construction of his second large manufacturing location so rather than go to his current broker to add it, he asked me to review and provide terms. He was pleased with the results and we bound coverage.
When the balance of his insurance portfolio was due to expire, we went to work. A proposal was provided to the insurers that I represented. Again, I was successful and the entire commercial account was now represented by my brokerage firm.
Here’s the interesting thing, one of the insurers I had approached and the one that was ultimately successful indicated that the previous broker had “shopped” this account every year for years. They were surprised to learn that the client had never been advised that the broker was “shopping” the account. Nor were they advised that the new insurer’s terms were more favorable than what the previous broker had offered through one of his other insurers.
So, what was going on in the background?
The previous broker was not acting in the best interests of the client but themselves. They had no intention of providing the insured with less beneficial terms. They were just blocking the market so no other broker could get terms. The insured was paying the higher premium amount thus increasing the revenue the insurer paid to the broker. How is that fair?
The insurance tendering process is in no way similar to the well-known construction bidding process.
In construction, multiple general contractors will submit their tender prices to the owner using selected sub-trades as necessary. Those sub-trades will provide their quote to one or many of the general contractors. Just because they submitted terms to one contractor doesn’t preclude them from providing the same or even different terms to the others.
In insurance, most insurers provide terms only to the first broker with complete submission. The insured may have gone to 3 brokers however only the first one will get terms. The other two, who submitted after will not. The first broker has effectively “blocked the market”.
There are a few variations depending on the insurer. The following are some rare market options:
- The insurer will only provide terms to the broker with the most complete submission.
- The insurer will review all submissions and if the information varies from one broker to the next, specifically as it relates to claim, they will decline to quote any broker for at least one year.
- They will go back to the broker/brokers and request a brokerage letter appointing just one broker to represent the client.
- They will accept an assignment letter where each broker is assigned different insurers to approach exclusively.
As to why market blocking even exists, I’m not sure so I spoke to several retired or semi-retired insurance company professionals. There were several reasons why management may have decided to implement the decision to only quote to the first broker with a submission.
- It eliminated the possibility of underwriters playing “favorites” with specific firms or agents.
- Different brokers providing conflicting information may receive quotations based on that conflicting information which would result in terms or prices that were different.
- By quoting to only one broker with the first set of information, it reduces the underwriters’ workload.
- If insurers see the same risk year after year, quite often those submissions go to “the bottom of the pile”. Underwriters have long memories.
In any event, it is my recommendation that to eliminate that potential problem the insured should vet their insurance broker/consultant first and let the broker approach the insurers who would be most appropriate to provide terms. Your broker is representing your business and needs to know all the facts to properly assess the risks, prepare the submissions to the insurers and obtain the best in terms and pricing for you. Disclose everything especially previous claims history as misrepresentation of your situation or previous claims history can leave you without insurance when you need it most!
For information about commercial insurance in the Edmonton area, contact Heather Cournoyer at email@example.com, or call 587-597-5478.
Have you lost your job and are now being forced to find another source of income? Have you decided that now’s the time to start that new business venture you’ve been tossing around for years? Wondering where to start?
If the answer is Yes, then read on.
Growing up on a farm gave me the unique opportunity to understand some of the most important values in life; the value of honesty and integrity, teamwork, providing something of value to others, and hard work. I remember one morning my dad waking me up early before school and telling me it was my turn to help with morning chores. I told him I would eat breakfast and be right out. He made it clear that chores came first. “If the animals don’t eat, you don’t eat!”
Those values have served me well and to this day, it’s important that I provide value to others through my contributions. In my case, it’s helping small to medium size businesses protect their investments using insurance and risk management techniques I’ve learned over the years.
Many of you may have heard the term “hard market”. We in the insurance business understand that but what does that mean to you, the consumer? It’s actually relatively simply. More dollars are flowing out in claims than are flowing in as premiums which is necessary to have a modest return on investment for the investors. When that happens, investors don’t want to invest capital into an industry that is not making a profit. Insurer’s stop writing certain classes of business that traditionally have higher losses, they tighten up their underwriting criteria for existing business and increase premiums. That is a “hard market”. The most recent casualties included snow removal contractors, the hospitality industry, and new business ventures.
For those of you starting a new company, you’ve probably experienced this with rejections from insurers for a quote. Those quotes you are getting seem exorbitantly high. So, what can you do?
1. Do you have a business plan? Whether you are looking for investors, customers, suppliers or even partners you have to be able to show them it’s financially viable.
2. Find a broker who will work with you and understands how to present your business in the best light possible to the underwriters. Do they have the education, experience, empathy expertise, and enthusiasm to do the job https://heathercournoyer.ca/2018/08/09/goldilocks-and-the-three-bears-insurance-brokerage/
3. Don’t wait until the last minute to get insurance. In today’s insurance market nothing happens quickly. Depending on the operation, quotes can take anywhere from 2 days to 2 weeks or more to obtain from the underwriters.
4. Be prepared to share as much information as possible. It’s not just about the business you are starting, it’s about how you plan to make it successful. Do you have transferrable skillsets? What is your previous experience? Just because you are good at your trade or craft as an employee, doesn’t mean you will be a successful business owner.
5. Understand your exposures and work with your broker to help mitigate those exposures. Preventing losses is just as important as having the right insurance in case you have a loss.
Albertans have faced some of the most difficult economic challenges in the past several years made even worse because of the global pandemic. However, we are a resilient bunch and entrepreneurship is alive and well. I’ve successfully found insurance for many of the unique businesses launched in our community lately and love a challenge. If you need help, drop me a line firstname.lastname@example.org or call at 587-597-5478 and we can do this together!