Myths, legends and lies are hard to dispel and correct, especially when doing so appears to financially harm the teller or believer. If the myth is true, the client (the teller/believer) does not need to purchase the coverage on which the lie is based; but if the information is false, the insured is forced to make a business decision not previously required.
Belief in and dependence on the lie can financially harm the insured to a far greater extent than the additional premium necessary to cover the exposure masked by the myth. But be warned, exposing these, or any, insurance lies will lead to charges like, "You're only trying to make more money off me." Or, "Well that's not what 'so-and-so' told me."
Remember, "so-and-so" is not the insurance professional, and a multitude of people's belief in a lie or myth does not change the reality. The agent's job is twofold: 1) to ferret out and expose to the client these lies; and 2) be prepared with the factual data (policy language) and anecdotal evidence (court cases, etc.) necessary to convince the client of the truth. (Stories work best.)
Beyond the non-insurance "so-and-so's" spreading these lies there are agents also perpetuating some of the insurance myths discussed in this article. When insurance agents or other so-called financial experts put their seal on such harmful lies, correcting the problem is that much harder. Lack of knowledge or dependence on what the agent heard someone else say without checking the facts themselves are the two main causes an agent might pass along false information.
Following is a short list of myths, legends and lies told by and believed by insurance clients. Some of these are the result of just plain ignorance (not stupidity, just lack of understanding); some are the result of an "experts" faulty advice; and a few are actually promulgated and spread by insurance professionals. The list is far from all-inclusive.
"If I don't have anything, they (the plaintiff, lawyers and court) can't get anything; you can't get blood out of a turnip."
Want to bet? The belief that an at-fault individual cannot be financially harmed because they don't have much is one of the most insidious lies conceived by its originator. Future wages can be attached; possessions can have liens placed against them, etc. Many states don't allow the court to take someone's house in settlement, but the at-fault party will be unable to amass much beyond the house until the debt is satisfied. A lot of what can be done might be subject to state law, but the pound of flesh will somehow be exacted.
"There is no need to purchase liability limits higher than my net worth."
A slightly smarter version of the lie revealed above. A person's net worth is the value of all they own minus all they owe; why should it be the magic number, that's not all the attorney is going to ask the court to award. More than one individual with a net worth of $250,000 (for example) has lost a $1 million negligence suit. A rule of risk management is, "don't risk a lot for a little." Umbrella and excess policies are very inexpensive bordering on cheap compared to the limits that can be purchased - invest the money in the protection.
"That's why I buy insurance."
Context of this statement is the basis for its problem. If the insured has done all he can reasonably do to avoid a loss or injury (to the point of maximum benefit without undue burden), then there is nothing intrinsically wrong with this statement. However, if this statement is made because the insured is unwilling to take any or very few steps necessary to reduce the potential for injury or damage to persons or property, then his attitude has morphed into a moral hazard. While this may not be a limits or coverage myth, it is a statement that should make the agent question whether or not this is an insured with whom they want to do business. Additionally, claims submitted by such individuals may need to be viewed with an eye towards possible irregularities.
"Corporate status will protect me from liability; I'll just declare bankruptcy and shut down."
Courts can and do pierce the corporate veil in small, closely held corporations. Not being able to provide legal advice (which is a disclaimer agents should provide), this is not to be construed as legal advice; but do not let a statement such as this one go by unchallenged. Governance and tax considerations should drive the choice of a legal entity-type, not protection against personal liability. A one- or two-man corporation can very likely expect to see the veil of corporate protection removed if the injury or damage is severe enough. Many insureds use this myth to avoid purchasing an umbrella or excess policy. As stated above, don't risk a lot for a little; find court cases where the veil has been pierced and the affect on the owners.
"Public adjusters are bad (or good)."
Agents and adjusters generally portray public adjusters as bad for one of two reasons: 1) agents don't want their clients to think another party can do something for them they can't; and 2) adjusters may not want to deal with someone who knows as much or more than him/her about the policy language and coverage.
Agents owe a specific contractual duty to the insurance carrier and can only go so far in helping the insured following a loss. Also, agencies likely do not have the manpower necessary to do all the work that a public adjuster does (the good ones anyway). Public adjusters can also devote more time to the claim than the agent. Helping an insured find a REPUTABLE public adjuster may actually be a good service. The key is reputable as there are a lot of public adjusters that, let's be honest, fraudulently inflate claims and those that charge an unreasonable percentage of the settlement amount.
Adjusters and insurers who do a good job of helping the insured will not trigger the need for a public adjuster. But no adjuster doing a good job should be threatened by an ETHICAL public adjusting firm's involvement. In fact, an ethical firm can make the adjuster's job easier because they are thoroughly familiar with the process and can get the claim closed more quickly and efficiently. Unethical firms make an adjuster's job harder and may actually push fraud on an unsuspecting insured.
Public adjusters are either good or bad depending on the ethics of the firm and the circumstances of the loss. An ethical firm will try to get the insured exactly what they are owed as per the policy provisions and limits. Unethical firms use teabags to stain walls and do other things to try to garner settlements higher than owed based on the original loss (editorial comment: unethical public adjusting firms should be exposed and run out of the business).
"Insurance is all the same."
This myth is the hardest to overcome. GEICO, Progressive, Allstate and others have effectively convinced our clients that insurance is all about price. Even we insurance agents have contributed to this lie. My first phone calls to prospects began with, "I'd like to see if I can save you money on your insurance."
Insurance should be about the protection provided not the cost. That is not to say the cost should not be considered, but we must remove the idea from our client's minds that it is all about cost. Insurance not only protects the insured's stuff, it also protects the insured's revenue-generating capacity; and insured's want to protect their revenue and their revenue-generating capacity.
Agents must, somehow, remove cost from the equation and replace it with value. I recently challenged an agent saying that I can ALWAYS build an insurance package at a lower price than anything he can offer; but my follow-up question was, "but will it provide all the necessary protection?" Overcoming this myth will require a similar challenge to our insureds; remember the fear of loss is often greater than the desire for gain. A poorly designed insurance program (i.e. the cheapest policy) can cause a major loss in the insured's bottom line (the one looked at and depended on most heavily). Show the insured how the program protects the bottom line, not how it lowers expenses.
Coming Next
These have been general insurance lies. The next post will focus more on coverage-specific myths, legends and lies.
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How about the lies that agents make often - such as "we represent all the major insurance carriers" No independent agent does this, not one. Many represent a lot of the major insurance carriers but not all. "we've gone to the entire market place and no one will offer a better policy or price" There are usually always other players willing to offer a better price and coverage. The one I hate the worse is when an agent badgers their client from even looking outside of them...and then tells them everything they have done for them. If an agent is a good agent - they will keep the client base on reasonable pricing and excellent service - they don't need to use such tactics.
There is lots more to this can of worms -
Andrea Luoni
http://www.RateCraft.com