Finance Monthly April 2020 Edition

How has practising ethical insurance rewarded you? Some people say it takes money to make money. We have never found that to be true. With good character and hard work, we believe we can achieve anything if we trust that who we are and what we stand for is enough to reach our goals. Those who believe in our product have first believed in us, and the character we practice is the character we attract in our base of clientele. Up until now, I have spoken of prospective clients and insurance brokers who have disheartened me. I am happy to admit that the greater majority are willing to do the right thing. The clients standing by me in my ethical practices have profoundly motivated me to stay put in my tracks and I would give all of them recognition if I could. Over the years, prospective clients seeking a better rate from their current insurance policy - upon our comparison of their business operations with their upcoming project requirements - were surprised to learn that our rates were sometimes higher than their broker’s current policy renewal. After taking the time to explain the reasoning behind our higher premiums and the potential dangers of inaccurate underwriting which can lead to a large audit bill or a claim being denied due to “material misrepresentation with intent to fraud”, we then asked the prospective client to return to their current broker to match our quote’s coverages with theirs in a revised version. They were incredibly appreciative that we took the time to explain the importance of making sure they were properly covered. Other times, these prospective clients have decided to become our clients as a result of seeing our ethics in practice. Ultimately, we have gained business doing the right thing rather than turning a blind eye, and many of these clients account for the growing success at Fairbanks Insurance today. Some of the more priceless rewards I experienced are ones where my clients directly benefited from our consultations on proper insurance coverage. There was a time, for instance, when we talked an H-VAC client into paying an extra couple hundred dollars for a heating device endorsement that he later needed due to having to file a claim caused by a torch fire. Paying a couple hundred extra dollars, in the beginning, saved him a couple hundred thousand dollars of personal money in the end for which he was eternally thankful. Another time we advised a general contractor building an unspecified amount of tract homes to drop his policy that maxed at a predetermined limit of units and take a different policy where the number of units was irrelevant. As it turned out, this was a critical factor in deciding whether coverage was going to be provided and now he is being defended by that carrier in a class-action construction defect lawsuit. Switching policies gave him a fighting chance which will likely save his company. Needless to say, his gratitude was endless. Stories like these, of which I have many, make our efforts to be ethical brokers worth every sweat, tear and sacrifice. They personally reward my soul and provide me with an abundant supply of happiness. What have been the recent changes in the regulatory environment regarding general liability and workers compensation in the US? Underwriting has tightened up significantly over the past few years in the state of California with regard to general liability and workers compensation. It has become increasingly more difficult to place higher risk trades with workers’ compensation carriers when ordinarily the carriers would write the policy immediately. Therein arises another opportunity for brokers to act unethically out of desperation. With worker compensation underwriting departments now working more closely with statistical agents such as the Worker’s Compensation Insurance Rating Bureau (WCIRB), it is far more challenging for intentional acts of material misrepresentation to achieve lower premiums. Still, a simple checkmark on an application rating a “Carpenter” as a “Finish Carpenter” could result in the required rate being up to one- half or even one-third the original price depending on the program in which it’s being quoted. Typically, the unethical broker will attribute these miscommunication errors to the client who is now learning the year-end audit has just generated a massive bill for the proper class codes in which they should have been rated in the first place. This is usually the time when the unethical broker’s client will hear the “Sorry man, but you read it, you signed it” spiel, leaving the insured to fork out hundreds to several thousands of dollars in unintended additional premium as a rude Do the right thing when no one is looking. 16 www.finance-monthly.com FRONT COVER FEATURE - ETHICAL INSURANCE