January 18, 2012

Credit Union Management magazine’s Web-only “Insurance Matters” column runs the third Wednesday of the month.

Twenty-five insurance problems! In every insurance review I do for credit unions, I find at least twenty-five issues of concern. Sometimes the problems I find are small and sometimes they are big. No credit union has the perfect insurance.

So, since I know your insurance has problems, the question is how big are those problems and how much pain could they cause?

Maybe your deductible is too low. That is certainly not catastrophic.

Maybe a subsidiary of the credit union is not properly listed. Oh, that could be a problem.

I just finished a review for a client with no lender liability or professional liability. A very big deal! The same client had no coverage for its liability under the Employee Retirement Income Security Act. Explain that one to the vice president who is personally liable for a mistake made.

What is the financial impact to your credit union of a $250,000 uninsured loss? How about a $1 million loss without insurance?

Here are some strategies every credit union can use to plug the gaps.

1. Meet with your insurance agent. Meet with your agent annually to review your coverage, catch her up on changes in your business, and talk about hazards.

Your agent should provide you with a coverage summary and a report of losses. Talk about where your credit union has been and where you plan to go. Are you considering mergers or acquisitions? Is a new product line being considered? Are you planning new locations or buying new equipment? Are you discontinuing any operations?

What does your agent intend to do in preparation for your current policy renewals? What strategies will control your costs while improving protection? Are there new insurers to consider?

Let the agent know of risks you’re concerned with. Look at your loss record. What can the agent do to help? Find out what services the agent offers that can assist with problem areas. Learn what services your insurer offers.

2. Ask questions. Questions generate conversations. Ask your insurance agent probing questions about your coverage that will push him past the normal rote response. These might include:

• If we were a prospect and not a client, which insurance company would you recommend we consider for our credit union’s policies?
• What is your plan for the coming year’s renewal?
• What should we consider for coverage improvements?
• How can we make our credit union more attractive to insurers in an effort to receive better coverage at a better price?
• What are your concerns with our insurance program?
• Do we have coverage for our exposures to personal liability under ERISA?
• Do professional liability claims reduce the coverage available in other coverage sections?

3. Build a claims management program. Big or small, your credit union should have a plan for handling incidents. Claims management includes follow-up with the adjuster. Stay in touch with employees who are injured in workers’compensation claims, too.

If you have a company vehicle, keep the phone numbers of your insurance agent and insurance company handy. Let employees know that in case of an auto accident with injuries, they should call the insurance company from the scene if possible. Make sure your insurer’s phone number is on the insurance ID card in the glove compartment. All credit union vehicles should have a disposable camera under the driver’s seat to be used if there’s an accident.

Know what claims to report and to whom you will report them. Discuss with your agent what actually determines when you report a directors’ and officers’ claim.

Managing your claims means you are on top of the claims process. Your diligence also will be noticed by over-burdened claims adjusters who will be more aggressive with your case files.

4. Consider bidding your insurance this renewal. The insurance marketplace has become a place where, in order to get the best coverage, best price and best service, you must bid your insurance regularly.

Many insurance buyers ask their agent to bid coverage to other insurers. While this may be a step up from just renewing your insurance, it has proven to be a distant second to getting multiple agents and multiple insurers to offer proposals.

If you direct your insurer to just renew your coverage, you will get terms similar to your current policy. Asking your agent to get quotes from other insurers will force your current insurer to sharpen her pencil. However, your agent need not sweat the renewal. She knows that regardless of what happens, she is keeping your business.

Introducing another agent and a few more insurance companies to the process forces both your insurance carriers and your agent to be aggressive, or risk losing your business.

Start working on renewals four months in advance. Push your agent and insurers on coverage and price.

5. Negotiate, negotiate, negotiate. Everything in your insurance program is negotiable. Everything, that is, until you have a claim. Just because you have a three-year policy that expires next year does not mean you cannot improve your coverage and fix problems you find now. Work with your agent and insurer to uncover areas of weakness now. Once the claim happens, that door closes.

Note: The playback of my recent CUES Webinar on directors’ and officers’ insurance is free to CUES members. Log in at cues.org, then click here.

Scott Simmonds is the unbiased insurance guy, consulting on, but never selling, insurance. He welcomes questions from readers, and will attempt to answer as many as possible in future columns. E-mail him for a copy of his white paper, “Questions Credit Unions Should Ask About Their Insurance.”