Careless Mistakes by Your Broker Can Lead to Uninsured Losses

Last week I reviewed a prospect’s insurance policies and was shocked by the carelessness in which these policies were put together. When I took my first look at the policies to get an overview of what the policies looked like I was so surprised that I had to email the prospect and ask them if they sent me over the complete policies and all of the subsequent endorsements. They had and in turn, I was compelled to ask the ensuing two basic questions:

  • Can you confirm the name of your company?
  • Can you confirm where you are located and confirm all of your locations if there are more than one?

As you can guess, the prospect was confused about this question why I would be asking it. I think he was wondering if he had made a good decision by letting me review his policies. After all, if I don’t even know the name and location of the company how interested could I be in working with this company. A simple search on Google can provide these answers. The prospect actually said as much to me, which from a sales perspective was the best thing I could hear before I was about to explain why I needed these questions answered.

I explained that I had reviewed their website multiple times to double check that I had the name and address of the company correct and that I was not losing my mind. Why? Because on the four policies they had asked me to review, there was an incorrect Named Insured on two of the policies and an incorrect mailing address on three of the policies. As you can see from the matrix below, of the four policies I reviewed not one had the correct Named Insured and mailing address.

Nowhere in the policies did it list additional locations or additional named insureds. Even in the property portion of the package policy the location was wrong, rendering the property policy almost worthless. Needless to say, the prospect was no longer concerned that I asked them to confirm the company’s name and address.

What may be surprising to you is that their insurance broker is one of the largest global brokers in the world. With all of the resources they have how could something so important and obvious be missed? Simple, despite the fact that this prospect is a private biotech company that has raised millions of dollars in the private market and is nearing FDA approval of their first therapy, it brings in relatively little revenue to the global broker. Little revenue is a relative term, but for the largest global brokers, anything under six figures is “little revenue” and as a result they probably aren’t getting the “A” team.

Contrast it to a law firm where you pay different rates depending on the quality and experience of the attorney. In insurance you are paying the same rate regardless of whether the top broker at the firm is working on it or the most junior person. The broker may very well have a senior person come out to the meetings to make it appear that you are getting the top person, but after that they are handing it off to someone else who gets paid less and enables the firm to get a higher margin. Right now, this prospect’s insurance spend does not generate a lot of revenue for their insurance broker and as a result is clearly not given the attention it needs

If a broker cannot get the named insured and the locations correct what else do you think is wrong with their insurance policies?

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