Your insurance coverage is only as good as the agent structuring it

Despite the attempts of many insurance companies to create the perception that insurance is a commodity — nothing could be further from the truth.

“While it is important to place your coverage with a stable, reputable carrier, insurance policies are legal contracts and are only as good as the expertise of the agent that structures your insurance coverage,” says Chris Zito, president of Zito Insurance Agency, Inc.

Many agencies represent themselves as being “full service,” however often that only means they sell several different types of polices. Your insurance agent should take more of a consulting role, or in some cases be an outsourced risk manager.

Smart Business spoke with Zito about what to look for in an insurance agent or broker.

What can happen if business owners don’t have the right agent?

A business may operate exposed to risks that management doesn’t realize exist. When coverage is not in place and a claim occurs, the business may incur significant out-of-pocket expenses.

These situations can to occur as a result of changes in the legal or regulatory environment. Alterations in how business is conducted can alter exposures, for example an increase in cyber exposure or employee litigation.

How should business owners evaluate their current or prospective agent?

It is the job of an agent or broker to educate the business owner about potential risks. There isn’t a right or wrong approach to structuring an insurance program, which may include choosing not to purchase traditional insurance for a given risk.

That said — it is absolutely critical that the business owner makes a conscious decision versus unknowingly self-insuring a risk.

Here are some questions to keep in mind when evaluating an agency or broker:

  • Do they have expertise in your industry, including a thorough understanding of the risks that are unique to your business?
  • Are they transparent in how they conduct business? Do they disclose pricing for all proposals obtained? Are they willing to share how they are being compensated?
  • Does the agency represent a diverse number of high-quality regional and national insurance carriers that can accommodate your current and future coverage requirements?
  • Do they maintain a dedicated claims administrator on staff? Many agencies view claims personnel as an unnecessary expense and direct clients to contact the carrier’s claim department for assistance. Paying claims is why insurance exists, and the quality of the claims handling process can be a chance for the right agent to excel when you need him or her most.
  • Is your agent part of the greater community? While it’s possible for an agent to handle your insurance efficiently from another part of the state, or even out of state, most business owners prefer an agent who is engaged with the community.
  • Does the agency have the capability to handle all aspects of your insurance program — business, personal, group benefits, life insurance, estate planning, etc.?
  • Do they offer ‘value added’ services, such as claims analysis, risk management, safety training materials, etc.?
  • Is the agency willing to provide references from companies in your industry?

How often do agents need to be evaluated?

It really depends on how proactive the agent is in addressing market conditions, relevant legislative changes and updates in the company’s operations. If the only contact you have with your agent is to deliver a policy or collect premium, it may be time to consider alternatives.

Insights Business Insurance is brought to you by Zito Insurance Agency, Inc.