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The evolution of insurance products

Feb 18 2015

Claims are a major driver in how insurance products evolve. At a micro-level , claims trends can influence what loss situations that insurance companies may exclude from  insurance policy coverage. On a macro-level, claims largely determine the markets and/or geographic areas in which insurance companies want to do business.
Insurance companies devote significant dollars to analyzing risks and the common demographic, geographic and behavioral characteristics among similar claims. These factors determine what types of clients an insurance company wants to attract and influence premium rates and policy exclusions. 

A current example of how claims drive the insurance process is ride sharing services like Uber and Lyft and the exposures they entail.  In Massachusetts, the Personal Auto Policy exclude coverage for sharing, lease or rental of your car for a fee or other compensation.  Recently, MA passed legislation; however, there are many unanswered questions as the coverage situation has not changed. Because there is so little claim history and associated case law, not many insurance companies locally or across the country have thrown their hat in the ring to assure the operator of the vehicle and/or the guest occupant is in fact covered if an accident occurs. Currently, in MA, an Uber or Lyft driver actually needs a livery policy to have his/her vehicle and liability covered when transporting passengers. Perhaps, this will change as claims history develops and insurance companies get a handle on the real exposures and are able to forecast them.

exclusionsWhen it comes to buying insurance protection for your business (or personal) needs, the discussions often primarily focus on what is covered and the insurance coverage dollar limits. However, it’s just as important to for you as a consumer of insurance to ask your agent what loss situations are not covered, or capped/ limited in any way.  Because knowing what’s not covered can be just as important as what is covered.  Not having a clear understanding of what is excluded under your policy can potentially lead to claims that threaten the viability of your business.

While the risks associated with personal home and auto policies tend to be more similar, the risks associated with businesses can be very different depending on your industry. For this reason, it’s almost equally important to ask your agent if the company providing your insurance coverage has a long history of writing policies for the risk associated with your industry.  Companies with greater experience often write policies with language that provide better coverage and less exclusions because their experience has helped them to better understand the associated risks.
The reason you buy insurance is to be covered for a claim. So, don’t just ask your insurance agent what your insurance policy covers; have a clear discussion about what’s not covered.  Policies can differ among insurance companies, and you may find that there are options for broader protection through a different company.  The premium might be higher; however, if you’re getting better coverage that can prevent a situation where you’re not covered, It can be well worth paying a bit extra.

The key is to be clear on where your exposures and what protection you’ve purchased because no one wants to be surprised when a claim occurs.  Cost is always a consideration, but the most expensive policy is one that doesn’t actually provide the coverage you need.  When managing risk with insurance protection, you may decide to retain some risk by having higher deductibles or decide to forgo coverage for certain situations.  At Murphy Insurance, we continually strive to present you with options and clearly communicate about your exposures so that you can make educated decisions about your protection plan.

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