Homeowners HO-5, or HO-3 with HO-15
Kevin J. Felix
the HO-3 with HO-15 endorsement, formerly known as the HO-5. And of course,
if what I see in my area is indicative of what goes on in the rest of the
world, most of us write the HO-3 WITHOUT the HO-15 endorsement.
How do you other agents feel about that? Why do we write the HO-3? Price
issue? Company availability? Company policy? Eligibility guidelines?
Client preference? Post responses here.
--
Kevin Felix
Felix Insurance Agency, Inc., Plymouth, Indiana
Coverage for the usual...to the unusual
http://www.felixinsurance.com
Stripeypants
| I think most of us agents know that the broadest homeowner form available
is
| the HO-3 with HO-15 endorsement, formerly known as the HO-5. And of
course,
| if what I see in my area is indicative of what goes on in the rest of the
| world, most of us write the HO-3 WITHOUT the HO-15 endorsement.
| How do you other agents feel about that? Why do we write the HO-3?
Price
| issue? Company availability? Company policy? Eligibility guidelines?
| Client preference? Post responses here.
It's relatively simple for us down here in hurricane alley. Nearly all
of the HO carriers are moving toward less comprehensive coverage forms.
This may come as a surprise, especially for those of you that know my
"client focus," but this is probably a good thing for the industry. As you
all know, HO coverages have been getting broader and have been very much
underpriced (at least here in FL) for years. The pendulum is now swinging
the other way, with premiums and exposures coming more into line. By way
of example, people that want to live right on the Atlantic or Gulf of
Mexico will have to start paying their fair share, statistically speaking.
For such properties, it's not a matter of *IF* there will be a loss, but
*WHEN*.
First and foremost, most clients simply don't care and don't understand
their coverage, anyway. It's our job to do that for them, for the most
part. Some of the top-end personal lines clients do understand, but they
are few. So, my assertion is that client preferences are not an issue.
This is strictly an issue for the carriers. . . to be honest, it really
does not significantly affect most claimants, either. Many of the
coverages found on the "deluxe" forms are not really needed by the average
homeowner, in my experience. For example, how many clients really NEED the
full amount of 'other structures' coverage provided in the HO form? Not
many, IMO, but we all pay a premium for it. My thought is, let's front
line underwrite, establish whether there's a client need, and then charge a
premium for the coverage if needed.
In Florida, I see this trend cutting across all personal property
coverage forms. Bankers Insurance, for instance, filed a 'cut down'
version of their HO-3. Then, they tacked on a bunch of endorsements to
make it very similar to the standard HO-3 form. The difference? Price.
The premium for the endorsed coverages, which used to be built into the
basic premium, is now additional, and quite substantial. Some of this is
dictated by politics, as I know that the carriers and insurance
commissioner are not exactly having a love-fest at the moment. Perhaps
this is a way of achieving the price level a company is looking for in a
given line.
Again, Kevin, my feeling is that, if we as agents do a better job up
front matching coverages to actual exposures, we could strip some of the
goodies out of the basic contract and sell only what is necessary. On the
positive side, the comprehensiveness of the form protects clients better,
and protects lazy agents better. There is a premium to be paid for that,
however. One more bonus, though, is that it gives public adjusters less
room to wriggle, and that is a VERY good thing. (I can already feel the
flames from Braga.) I know that there are good PAs out there, and that
there is a legitimate place for them in our business. In my experience,
however, things they do very well include finding nonexistent coverages,
slowing down the claims process, bumping up loss ratios, and making the
agent-client-company relationship antagonistic. Again, some are good and
ethical. Most of those I have personally dealt with are not. Let the
flames commence. I stand by my assessment, and my apologies for moving
off-topic a bit.
Looking forward to hearing form some of the other good minds on the NG on
this one (hear that Kevin, Ace, et. al.?)
Trey Hutt, CPCU
InsDyktor
>is
>| the HO-3 with HO-15 endorsement, formerly known as the HO-5. And of
>course,
>| if what I see in my area is indicative of what goes on in the rest of the
>| world, most of us write the HO-3 WITHOUT the HO-15 endorsement.
>
>| How do you other agents feel about that? Why do we write the HO-3?
>Price
>| issue? Company availability? Company policy? Eligibility guidelines?
>| Client preference? Post responses here.
>
>
Working for Nationwide here in Virginia, I've got a slightly different
situation with regar to the HO forms I offer my clients; I'm sure most of you
have heard about the consent decree. We are now required to offer the broadest
possible coverage form to every single person who meets our underwriting
guidelines, unless they specifically ask for something less. It's maddening.
And our eligibility guidelines aren't terribly stringent, so most of the HO
business I write goes on our Golden Blanket policy, which is, I believe, the
equivalent of an HO-3 plus HO-15.
Luckily, I don't have to cope with Trey's problem of "hurricane alley--"we have
agents who deal with nothing but HO in the windstorm territories, and I thank
God that I am not one of those agents.
As far as putting together more of a "cafeteria plan" for homeowners insurance
coverages, I would have to come down in favor of it. Yes, it is more work for
the agent, but I don't necessarily think that's a bad thing. Right now, I have
2 optional coverages to offer--ordinance and law coverage and water and sewer
backup (and the personal articles floater which is quickly being abandoned in
favor of the inland marine policy). I'd rather have a menu of what I consider
to be "gravy" coverages, and let the client decide whic of them he would like.
Unfortunately, some of the below are mandated by Virginia law, so I don't think
I've got much of a chance of getting them changed. Anyway, here goes--
1. Freezer Food Spoilage
2. Fire Department Service Charges
3. Medical Payments to Others--you already have personal liability, and I
think a minor revision in the "Definitions" section could really make this
coverage obsolete.
4. Scorched Surfaces
5. Paint Spill Damage
6. Chipping of Sink or Tile
7. Damage to Walls
8. Chemical Spills
Numbers 4 through 8 are what I call the "carelessness coverages," which means a
reasonably cautious insured probably won't need them. I've had a whole lot of
people ask me if they can exclude some of the above coverages in order to lower
their premiums, as a matter of fact, and I can't even tell them what amount of
their premium is accounted for by those coverages, because it's all rolled in
together.
I think, given the option and proper explanation from the agent, a lot of
people would choose to retain these relatively small risks. Sure, it's
expensive to replace a hardwood floor after you've spilled a gallon can of
Dutch Boy on it, but a lot of people (clients, not agents) to whom I've spoken
look at that as something that insurance shouldn't cover anyway, since it's
generally an act of the insured and not of another person or an act of God. I
don't know that I agree with them (it's that uncertain event thing again), but
I do think folks should be able to choose for themselves.
I also think they should have to sign a separate rejection for each coverage
they elect to omit from the policy--just to keep us and the public adjustors
honest.
You know, I've never met a public adjustor--I don't even know if we have them
in Virginia. Can someone explain this concept to me in a little more detail?
Thanks!
Kelly McHugh
Nationwide Insurance
RbtGilliam
>in Virginia. Can someone explain this concept to me in a little more detail?
>
Kelly,
It would surprise me greatly if you don't have Public Adjusters in Virginia.
If you don't, you will soon.
In theory a Public Adjuster is an advocate for the insured in the claims
process. Their function is to do their own review of coverage and scope of
damages then negotiate a favorable settlement with the authorized adjuster.
This is done for a percentage of the settlement much like an attorney will take
a percentage of his client's bodily injury settlement as a "fee".
That is in theory. In reality, Public Adjuster almost invariably inflate the
damages (it is in their vested interest) and attempt to invent coverages
demanding arbitration when they are told "No". I've had P.A.'s submit repair
estimates that are 10 to 20 times higher then actual damages and not even blink
at their own audacity!
Where as an argument could have been made that there was a place for an ethical
P.A. in the adjustment process, the average "street level" P.A. ends up
disillusioning the insured with wild claims of unjustified damage recoveries
while at the same time slowing the claims adjustment to a crawl. If Virginia is
P.A.-free, be very, very happy!
Bob Gilliam
Vanguard Adjusters Group, Inc.
RbtGi...@aol.com
Kevin J. Felix
I feel the best approach to choosing forms of coverage is to present those
most appropriate which are available to the applicant, make our
recommendations based on their risk exposures (hopefully revealed through a
thorough survey), allow them to make their choice, but document with their
signature their preferences for inferior coverages. I agree with Trey's and
Kelly's posts that the insured needs the freedom to choose desired coverages
rather than to have them determined by government decree or insurer or agent
whim. But we must also remind our clients of their own responsibility in
the process of negotiating coverage.
I feel that we as agents have the responsibility of a professional in caring
for our clients financial future, much in the way that a physician has a
responsibility to inform his or her patients of what the doctor believes is
the best or most preferred method of treatment after laying all available
appropriate options on the table.
We write far more homeowners policies than homeowners policies with HO-15
because it is what the client chooses. But we still offer the option to
clients who qualify according to insurer guidelines. It is generally either
an issue of price or eligibility.
InsDyktor
>for our clients financial future, much in the way that a physician has a
>responsibility to inform his or her patients of what the doctor believes is
>the best or most preferred method of treatment after laying all available
>appropriate options on the table.
>
>
Kevin--
I couldn't agree with you more. I think this is what frustrates me the most
when I go in to a prospect's home and start showing them what's available to
them, and which combination will best protect their interests; at least 3 times
out of 4, the person (or people) will look at me and say, "My (insert company
name) agent never told me this. Does everybody offer this?" I find that
horrifying--it's on a par with a fellow I once overheard saying that he doesn't
mention life insurance to his younger clients because "they can't afford it
anyway". I mean, really.
I guess the point I'm trying to make is that the job we do really is a position
of public trust, and I would like to see us, as an industry, do a much better
job of making sure that everyone's acting in a responsible manner. A 45 hour
licensing course does not teach you how to be an ethical, responsible
professional--which means that writing a policy, or policies, means a lot more
than making sure the check is signed.
MHO . . .
Kelly McHugh
Nationwide Insurance
Kelly McHugh
http://www.geocities.com/Area51/Dungeon/1302--Come Visit My New WebHome!
"It is error alone which needs the support of government. Truth can stand by
itself." --Thomas Jefferson
AceAdjustr
can of
As an adjuster, this is an area where I see a problem. IF there is no
insurance available for this problem (which is VERY RARE), what would he
prudent person do?
I would IMMEDIATELY wipe up the paint, and stay after it until it was clean.
Even IF it was allowed to set, it would still be possible to clean it up
WITHOUT "replacing" the floor.
It is this kind of claim that makes insurance expensive (and if the
underwriters are stupid enough to offer this type of coverage, they deserve to
get claims for this type of nonsensical "loss").