Do they need coverage? Why do you ask?

A question came in today asking if a customer needed a specific insurance policy. In the cold, distant, academic realm where I spend my time, it would be easy to simply say, yes. They need insurance. In fairness, my answer back was probably colder than a simple yes or no, but after I answered, while I was doing something else, my mind got to working on the problem. (Isn’t that just the way it works some days?)

Let’s revisit the broad question. Does the customer need (fill in the blank) insurance? It could be commercial property insurance, tenant’s contents, CGL, cyber, whatever the policy, the question is: do they need it? The short answer, like all of my insurance related short answers, is maybe. It’s one of those throw away questions that we ask thinking that it’s a simple yes or no question and there should be a simple yes or no answer.

If you’re asking the question, that means that there are conflicting thoughts in your mind. The insurance professional in you is thinking of course they need the coverage. The exposure’s there, isn’t it? Well, if there’s an exposure, there’s an insurance need. Yet, there’s another part of you that is questioning if the exposure is really that big a deal.

You may be asking; do they need it. But what you really mean is, do they REALLY need it? Those are two very different questions.

I’m going to explore this from a commercial side because the personal lines side is a little muddier because of the way people think about their insurance needs, the way we market to them about their insurance needs, and a host of other issues that makes it a little more complicated to help most personal lines customers.

First question: Is there an exposure?

That would seem to be a simple question, but it’s also possible that this simple question is an overlooked question. Is there an exposure? Here are a few questions that you should consider as you’re thinking about the big question, do they need coverage?

• Do they own vehicles?
• Do they rent vehicles?
• Do they use vehicles?
• Do they have a physical location?
• Do they sell anything?
• Do they use chemicals?
• Do they have employees?

That’s enough. The point here isn’t trying to identify all of the possible exposures that the insured might have but getting us to think about what their possible needs are before we explore any further.

Once we figure out what exposures are out there, it’s up to us and our broad knowledge of all things insurance to determine how to best help the insured with these exposures. This still doesn’t answer the question, but we’re getting closer now.

Next question: Do they really need that exposure?

Can you objectively look at the exposures that the insured has and say that they absolutely have to have them? Let’s be honest with each other, a pizza place absolutely needs to have an auto exposure. They need to deliver my New York style (is there any other kind?), thin crust, big slice, fold it once so it fits, let the grease run down my arm pizza pie. Sorry. I’m hungry.

Anyway, just keep in mind that sometimes a customer’s exposures aren’t all necessary to the operation of their business.

Next question: Is there a policy that will cover the exposures?

Here’s where you really start to show your worth. It’s one thing to say that someone has an exposure; it’s another thing altogether to help them to finance that exposure. We normally look at this as a simple matter. Do they have property? They need property insurance. Do they have operations, products, advertising, and a location? They need a CGL policy. Do they have or use vehicles? They need a business auto policy.

It’s more than that, though. Is it possible that they may have a flood in that area? In my mind, unless the building is actually located on the top of the highest mountain within five miles, at the Dead Sea, or located on the International Space Station, they probably have a flood exposure, so find coverage.

It’s not just about finding policies, though. It’s about finding the right policies that actually cover the customer’s exposures.

Next question: What’s really making you ask the question?

When you have a commercial entity and you’re asking if they need a specific coverage (let’s use something like cyber liability for our purpose here), you’re not really asking if they need it. You’re asking if they can get away without it. There’s something specific driving that question.

Could it be that you believe that they need the policy, but you don’t understand it well enough to feel confident in selling it? That may be what causes you to ask the question. You would love for someone to tell you that they really don’t need the policy. That way you don’t have to learn about it right now. You can push that learning off until later.

Could it be that you believe that they can’t (or don’t want to) spend the money for it? You deal with this customer and every year, you’re selling the good reasons that their premiums change. Maybe their workers’ compensation policy took a rate increase this year because of some preventable losses and you’re trying to get the whole dollar amount of their insurance purchases closer to last year’s number. You just don’t think that they’ll take on the extra expense for another policy.

Could it be that you believe that the risk isn’t worth the investment in insurance? You know that their funds are limited. You also know that while certain losses are possible, they are not very likely. So instead of recommending that cyber liability policy, you suggest that they make sure that they have some money in cash reserves for “emergencies”. Not a bad tip, just bad risk financing.

If you’re an insurance professional, and you’re asking if a customer needs a particular coverage, you would serve yourself and your customer best by finding out why you’re asking that question. It can be a totally valid question, but if you don’t know why you’re asking the question, you can’t get the best answer for your customer.

Oh, and one last thought, when the customer asks you the same question, you need to understand why they ask, too.