At first blush the package policies offered by many of the insurers in the commercial insurance market space look really attractive because of all the various extensions of coverage that are automatically included. Its no longer just a policy that insures your building and equipment against the risk of fire or hail damage. Some of the more common extensions are;
building upgrades
environmental upgrades
landscaping and growing plants shrubs or flowers
business contents away from premises and while at employee residences
valuable papers
accounts receivable
It looks great, but what does all this mean? How much of the total amount of insurance would apply to any one of these extensions? Some of it? All of it? Or are there specific sublimits? Do you even need all of them?
The fact is that most of these ‘add on’s’ do have real and important value.
Another truth is that most consumers have no idea what the value or relative importance of any of these extensions are to their particular needs. As an experienced broker, I know that these extensions are what are often referred to as ‘talking points’. That is to say, each one of these extension of coverage needs to be addressed individually and the correct amount of insurance allocated for each.
One of the notable examples from my own experience was a small consulting firm that suffered severe damage to the contents of their rented office due to sprinkler leakage. The stuff that comes out of a sprinkler pipe isn’t just water, and makes a real mess. This particular client had been referred to me by another much, much larger firm that had been an important client to me for many years. The consultant, albeit a very small one-person operation, was an important asset to the larger company who relied upon their essential services.
All they wanted was enough insurance to satisfy the provisions of their lease for the rented office space.
This is a very common scenario and one of the reasons we review lease agreements along with other contract our clients enter in to from time to time. The review of the lease started a cascade of issues as far as risk and assumed liability were concerned. The landlord was responsible for nothing other than providing space within four bare walls and heat. Any risk of loss even if it was due to the negligence of the landlord was pushed back upon the tenant.
We explained this to the consultant and advised them that we recommended a full suite of coverages with specific amounts to expand on many of the ‘add on’s’ as illustrated above. It came at a price higher than the $500.00 online quote they had received for ‘similar’ coverage. Three times a much in fact. They told us they wanted to do business with us but to reduce coverage to the ‘basic’ package as they felt that was all they needed. We responded by saying we were unable to do that and warned them of the potential consequences if they opted for the other quotation. We would close our file and wish them well. (Failing to warn them would open us up to liability for failing to do so even though we had no formal relationship with them. But that’s another story.)
As professionals and Trusted Advisors, we rely on referrals from our existing client base,
so, we always let out clients know what happens to their referrals. In this particular case the response was one of surprise and dismay. They wanted to know the whole story which we of course could not discuss in detail other than to say our advice was not accepted and the consultant was left seriously exposed.
Our client had been with us long enough to become educated on risk and contingent exposures in their supply chain and key service providers. The result? The consultant was asked to furnish a Business Recovery Plan with details of their risk management program and details of how they would finance their risk. They were no longer able to qualify as a preferred vendor.
They came back to us and not only did they take up the offer we had made, but asked us to advise them on the proactive steps they needed to take to mitigate their risk. We did so and for no additional charge, which makes no sense either, but that’s what we do.
Several years later…..
The building suffered a serious failure in the sprinkler system and the consultants’ office was deluged with the mixture of sludge and water from the piping. Everything in the office was rendered unusable. The consequences to our client were minimal with completely appropriate insurance and adequate coverage amounts for the so called ‘add on’s’. The cost of reproducing the paper records alone were ten times greater than the basic amount provided by the extension. The Extra Expense insurance made it possible for the consultant to engage the resources needed to get their physical plant up and running in a new location as well as the temporary space from which the business continued to run. There was virtually no interruption in the business or revenue stream.
We also coached them on the term of their new lease.
This is just one area where the commercial insurance package policies fall short. I should stress that this is not the fault of the insurance companies who offer these products. The opposite is true in that they are striving to offer the most appropriate coverage and service that they can. Its is up to the consumer to make sure they understand the product and how well it meets their needs and risk appetite.
Who should you go to concerning risk and risk financing?
We go to accountants for tax advice and lawyers for guidance in legal matters. Licensed and educated Insurance Brokers should be your Trusted Advisors for mater concerning risk and risk financing. Many people like to go to their lawyer or accountant for this kind of advice which makes about as much sense as taking your Lexus to your barber for service.
This is just one example of the pitfalls of the typical package policy, and this story is just as much for the average inexperienced broker who handles insurance transactions as a commodity instead of a matter that requires close analysis. The reason for this is simple; there is no money in it. On average, premiums are too low to generate enough revenue per transaction to make it worth handling this kind of business. The downside risk for failing to do so is out of all proportion to the percentage of revenue for the average brokerage firm where 20% of the clients generate 80% of the revenue.
Let’s have a look at some of the other policy segments and the various extensions of coverage that in a perfect world would be addressed in more specific detail;
Liability. The big question here is; ‘How much is enough?’
bodily or mental injury
property damage liability
personal and advertising injury liability
libel and slander
tenant’s property damage liability
voluntary medical payments
non-owned auto
legal liability for damage to rented automobiles
contractual liability
employers’ liability
employment practices
errors and omissions (professional liability)
Business Interruption
Loss of profits or gross earnings
Extra Expense
Rental Income
Key Payroll
Accountants’ fees
Restricted access to business
Key supplier
Mortgage rate guarantee
Equipment Breakdown
electrical arcing
mechanical breakdown
computers, photocopiers, production machinery,
heating and air conditioning,
point-of-sale (POS) systems and
refrigeration equipment
pressure explosions – hot water tanks, boilers
centrifugal force
I have decided to save the best for last. Crime is one of the most underserved risk segments and I haven’t even begun to talk about Cyber Liability or Environmental. The number of businesses who suffer a crime loss only to learn the basic policy sub-limit is $10,000 or less should be a wake-up call, but for some reason the average business owner does not take up the coverage, or if they have, for an inadequate amount.
Crime
employee dishonesty
money, securities and other property
counterfeit currency and money orders
forgery, alteration, credit cards and automated teller cards
electronic fraud and funds-transfer fraud
professional fees
incoming cheque forgery
In closing I can only repeat my opening comment;
Beware the Package Policy! Yes, the various extensions are important and valuable, but the amounts are basic and only serve to establish a basis for further dialogue.
Effective January 1, 2022, the Direct Compensation for Property Damage Regulation will change the way vehicle damages are handled in Alberta. Why is the Government changing auto insurance in Alberta and how does that impact you, the consumer?
Why is the Government changing auto insurance in Alberta?
Auto insurance premiums continue to escalate in Alberta for a number of reasons including:
Newer model vehicles involved in a collision cost more to repair because of the sophisticated computer systems. A small bump can easily cost $2,000 just to reset the systems.
Alberta is now the vehicle theft capital of Canada. Although Alberta represents only 12% of the Canadian population, we represent 27% of all vehicles stolen across Canada. In 2019 Ontario logged 23,992 stolen vehicles while Alberta came in at 23,535!
Alberta has more catastrophe claims than any other province in Canada. That includes flood, fire and hail claims.
The Government of Alberta in conjunction with industry realized that streamlining the claims process could save money and help stabilize or even reduce premiums.
How does the Government changing auto insurance impact you, the consumer?
Effective January 1, 2022, if you are involved in an auto collision, you will deal with your own insurance company with respect to your vehicle damages.
If you are at fault, you must carry collision coverage to recover your losses, subject to your deductible.
If you are not-at-fault, DCPD will apply and you will still deal with your own insurance company. All insurers must offer a zero deductible option for DCPD.
If you choose a deductible, this would help reduce your premium, however the deductible will apply to a claim, and you can’t recover the deductible amount from the at-fault driver.
Fault and/or the degree of fault is now clearly outlined in the Regulation.
How will this affect my claim and my premium?
Because you are now dealing directly with your own insurance company, your damages will be handled more efficiently and without the complications of dealing with the at-fault driver’s insurance company. It also eliminates the costs involved with subrogation. That’s where insurance companies have the right to recover the vehicle damage costs from the negligent at-fault driver.
It is estimated that 42% of drivers will see a reduction in their premiums, 15% no change and 43% will see an increase of premium. These changes will more accurately reflect the cost to repair your vehicle. Owners of less expensive vehicles that cost less to repair will typically pay less for their insurance. Similarly, owners of more expensive vehicles that cost more to repair may pay more. It’s a fairer system for everyone.
Do you have to do anything with regard to your insurance?
No, as the DCPD legislation is automatically effective January 1, 2022. One word of advice, however. If you do not carry collision coverage in your auto insurance contract and you are at-fault for a collision, you will have to deal with your repairs out of your own pocket, just like you do today.
In Alberta, it is the law that you carry a minimum of $200,000 Third Party Liability, Accident Benefits, and soon DCPD coverage. All other coverage remains optional. However, it is important that you understand what the optional coverage includes and also what extensions of coverage you may need. Always speak to your insurance broker to review the options.
Heather Cournoyer, CIB, CIP, is a seasoned insurance professional specializing in serving the needs of business in Alberta and BC. She believes that consumers need to understand their insurance program so that there are no surprises in the event of an unfortunate unforeseen loss. Contact her at heather@thinkinsure.ca or 587-597-5478 for further information.
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 heather@thinkinsure.ca or 587-597-5478.
In my last blog, we provided some great claims tips and promised that this time we would give you information on how a policy is set up and some of the things to look for.
A couple of incidents occurred that inspired me to share a bit more about the claims process and what resources are available when you have questions or a dispute with your own insurance company.
Being one of several insurance guru’s in my family, I get calls from family and friends whenever they have a question or issue. I either explain the situation or point them in the right direction. Sometimes I even get directly involved and help them solve the problem.
In one incident a perhaps over zealous or junior underwriter at an insurance company made a decision that was in contravention of the Insurance Act of Alberta. Knowing the channels to use, I was able to help solve the problem for one of my family members.
In the event you have an issue, the first place YOU want to go is your broker. He or she is the one who acted on your behalf to purchase the product for you. A good broker will understand the insurance contract and be able to either explain coverage, rationale for a denial and if necessary, intercede on your behalf.
If the matter is one where you cannot agree on the value of your property, repairs or replacement or amount of loss, your insurer must send you a copy of the Dispute Resolutions Process found in Section 519 of the Insurance Act.
More detailed information can be found at this website:
Outside of disputes to value, you can utilize the insurers complaints protocol process. Just google your insurer’s name and word “complaint” and it’ll usually take you directly to that process which involves management and ultimately your insurer’s ombudsman. Every insurer has to have one.
In addition to that, there are 4 organizations that you can reach out depending on the situation.
The Insurance Bureau of Canada (IBC) Established in 1964 is the national industry association representing Canada’s private home, auto, and business insurers. They have consumer information centres in each regional office staffed with seasoned insurance professionals who can address general insurance questions. You can phone or email and the contact information will be included in the blog on my website. www.ibc.ca
“The General Insurance OmbudService is an independent organization, created in 2002, with the sole purpose of helping Canadian consumers resolve disputes or concerns with their home, auto or business insurers.” https://www.giocanada.org/ After receiving a Final Position Letter from your insurer, they may be able to assist you. You can access them online at https://www.giocanada.org/complaint-form/ or by phone at (1 877 225-0446)
The office of the Alberta Superintendent of Insurance (SOI) of Alberta Treasury Board and Finance regulates, in part, the insurance business in Alberta under the Insurance Act. If you feel that an insurer has breached a regulation in the Insurance Act contact them. Again the information will be in the blog.
Hours: 8:15 am to 4:30 pm (open Monday to Friday, closed statutory holidays)
Phone: 780-643-2237Toll free: 310-0000 before the phone number (in Alberta)
Fax: 780-420-0752Email: tbf.insurance@gov.ab.ca
Finally, the Alberta Insurance Council serves to fulfill the mission of protecting Albertans through the licensing and regulation of insurance agents, brokers, and independent adjusters. If you have a concern or complaint with a broker, agent or independent adjuster contact them.
Having said all of this the majority of claims are handled quickly, efficiently and fairly based on the insurance contract between you and your insurance company. We all know too well, no one ever says good things about how their claim went. You only hear when people are unhappy. Sad but true. It’s common in every industry.
Hopefully, this information may be helpful to you.
If you have any comments or request for more information on any matter insurance – get in touch – contact information is at heathercournoyer.ca
I’m Heather Cournoyer, your commercial insurance expert and I’m coming to you from “sunny” Alberta where the temperature here has risen to a balmy -25 with a windchill of -31. Gotta love Alberta!
In my last video we talked about what to expect in the insurance market for 2020 and the 3 steps to take to prepare.
Review your operation – find ways to manage the risks and exposures in your business to prevent losses.
Review your insurance – Have you changed your operation, have your values changes. Is your business interruption coverage up to date? Do you have cyber and privacy insurance protection.
Lastly – meet with your broker to make sure that your insurance is updated.
So, what happens if you have a claim? That’s why you bought insurance in the first place. I spoke with several claims experts and asked them this question?
What is your best advice to an insured who has had a claim? Here’s what they had to say.
Before you have a loss – Have an adequate inventory and update it on a regular basis. Perhaps you might want to send a copy to your broker or at least keep a copy somewhere safe. Proving your loss is your responsibility and having an inventory of all of your stock and equipment is invaluable.
Minimize the loss to the best of your ability. For example is it’s a water-related claim (which are so common these days) Start cleaning up the water, Rent dehumidifiers help to reduce downtime. Pretend you don’t have insurance. The expert claims manager I spoke to said that not once has he denied reasonable costs to mitigate the claim
Another expert agreed with that and also added that if there is any evidence, retain it! Let’s say you just had a plumber in to fix a piece of equipment and that equipment may have caused the problem. Make sure you keep any parts, take pictures. Your insurer may have the right to subrogate – in other words, perhaps the plumbers negligence caused the loss and he should be held accountable.
Let’s talk about down time. More than likely, a loss can cause a disruption in your business which either reduces or eliminates your income for a period of time. Business interruption is much more common now. And although that is the case, it is still very misunderstood. You need to have good financial records that have monitored the trends in your business. Work with your adjuster and your accountant to help you determine what the amount of recovery may be.
In the event of a third-party claim remember to Be Patient It takes time to get all the facts in. The Adjuster will assess those facts. In auto and liability claims there are two sides to every story and somewhere in the middle lies the truth. Make notes as soon as you can. Pictures are always good too! Peoples memories change over time.
And finally, perhaps some of the best advise
Remember ……. The three C’s
BE CANDID
CO-OPERATE
REMAIN CALM
Help your insurer to help you!
Bottom line – insurance is a contract. And if you’ve ever watched Judge Judy she always says – “Everything is in the four corners of the agreement.” In your case it’s an insurance policy.
I know what you’re thinking…whoever reads the policy anyway. It’s too complicated and it’s legal mumbo jumbo.
In our next video, we are going to give you some tips about how that policy is set up and some of the things to look for.
A special thanks to all my “experts” for their input. Great tips for the consumer.
In May we talked about the “Hard Insurance Market” and we are certainly feeling it more and more. Affordability and availability in certain classes are a huge issue. We are getting more requests for “quotes”. “How much would you charge for my insurance?”
Well that depends. How much protection do you want? Are you prepared to spend some time figuring that out? When was the last time you sat down with your insurance provider and reviewed your business operations, property values, values of stock and equipment? Are you at risk for a cyber-attack? Can you afford to operate if your website is subject to a ransom?
We don’t object to going to our medical doctor to have our annual checkup. In many ways, insurance shouldn’t be any different. Although it does seem to be standard practice to get the renewal, check the price and then move on. That’s unless the price has increased. Then we want a “quote”.
As a broker, it’s my responsibility to ensure that I understand enough about my client’s business to recommend adequate and suitable insurance protection.
Sadly, in the majority of cases with my new clients I deal with, we find out that there are gaps in their insurance that they were not aware of.
Let’s look at some examples:
General Contractor had leased a $150,000 piece of equipment on a short-term basis and advised his insurance provider. The broker told him it was covered. Upon review of their existing coverage, there was no endorsement or policy change reflecting that coverage.
· My advice – get everything in writing!
Wholesaler had ordered additional stock and had it stored at another location as he had no space at his premises. He failed to notify his insurer and assumed that it would be automatically covered as he had a sufficient amount of insurance to cover all his stock.
· My advice – Sometimes there may be a clause in the policy which will extend the cover for a short period of time. If so, it will be clearly stated in your contract. In my new client’s case, it was not included in the contracts. When in doubt call your insurance broker. It can be added for a small additional premium.
Home-based business – Caller operates an esthetics business from her home in the corporate name. She has Professional Liability Insurance for her business but no Commercial General Liability. If any of her clients are injured e.g. (slip and fall on the ice or snow) she has no insurance protection.
· My advice – She should have been advised to see if her home insurer will provide her with a home-based business liability extension on her home insurance. If not, she should purchase a Commercial General Liability policy.
These are just a few examples of situations that can lead to a costly claim with no insurance coverage.
When in doubt ask and get it in writing.
For more information contact Heather at heather@thinkinsure.ca or text or phone 587-597-5478.
