Climate Change and your Insureds

Climate change has been a prominent feature in the news recently as we’ve seen an increase in both frequency and intensity of harsh weather. Whether you agree or disagree about the causes of this, the fact is that recent years have seen a surge in extreme rainfall events, heat waves and wind storms. Every subsequent year seems to hit a new record high or low. Setting politics aside there is a real cost (in terms of financial losses) that is increasing. According to Severe Weather in North America, a 2012 report (download) published by reinsurance giant Munich Re, “Nowhere in the world is the rising number of annual natural catastrophes more evident than in North America.” What does this mean to your insureds and what can you do as an insurance agent in light of this?

Protect from Perils

First and foremost, ensure that your insureds have proper coverage against a variety of perils. It’s easy to get caught up in offering the cheapest options but is that what is best for your insureds? Will the cheapest carrier be able to handle an unprecedented natural disaster? If you only sell products offered by carriers with strong financials rated highly by AM Best this may not be a concern for you. Even if you have excellent carrier options, what does their policy exclude? Do they need further coverage? An easy to identify example of this is flood insurance. Do your insureds need flood insurance? Even if they are outside of flood-zones what happens when a tornado, hurricane or some felled tree branch damages the roof or structure of their home? Many, if not most Homeowner’s insurance policies will treat rain water in these instances as flood related losses. Go over your insureds coverages with them and consider the impact of increasingly harsh weather.

Clarify Clauses

While you are going over your insureds’ policies with them, hopefully in an annual policy review, go over clauses that may affect them in these instances. An example of this would be the Named Storm Deductible Clause found in many policies. Under this cause losses due to storms that rise to the level of being, “Named Storms,” such as when tropical storms are named or become hurricanes and subsequently get named, carry a higher deductible than other losses. Make sure that your insureds understand these clauses in their policies.

Comprehending Costs

Also, help them to understand the premise of spreading risk. As the frequency and intensity of these storms increase so do the losses that insurance actuaries are looking at. It is very likely that these higher projected costs will be spread to policy holders. This makes sens to us in the insurance world but may come as a shock to your insureds. Be sure to explain to them how these storms could impact their premiums.

Reexamine Raising Deductibles

As always, to help them reduce premiums without a substantial loss in coverage, have them consider raising their deductibles. I have heard this called paying small dollars to protect your big dollars. Encourage them to increase or at least not decrease their coverages. Being underinsured in the case of a catastrophic loss will cost them much more than having a higher deductible.

Be there at the Beginning

Be available through the buying process. You can make yourself an asset by assisting new homeowners or those transitioning in choosing the right home from the get go. If they have a few options and one is in a flood zone or carries higher premiums then you can help them decide. This kind of personal touch and service can pay huge dividends as they bring other lines of business under your charge.

The rising risks of harsh weather can be an opportunity for you to show your insureds what sets you apart from the myriad of other agencies.