By Brian Pilarski, Brown & Brown of Detroit Commercial Insurance Advisor
Walking into a fast-serve restaurant, we quickly scan the menu and submit our order. In some cases, additional offerings are made: “Would you like to add fries for only 30 cents more?” or “If you buy another one it is half-off. Buy one, get one free.”
We have all experienced these quick interactions and decisions, and they are very commonplace today. The hyper-competitive consumer market forces businesses into creative ways to compete for the hard-earned dollar. These advertisements, sales, and inducements are regulated, from a legal standpoint.
What Does a Super-Size Option Have to Do With Insurance?
The ever important decision of which insurance to best protect you, your business, or your family is a legally protected one as well, for both the consumer (policyholder) and the seller (agent/broker). Thanks mostly to the McCarren-Ferguson Act, insurance matters are mainly regulated on a state level. Each state regulates insurance independently and differently, but all seek to protect the consumer from fraudulent behavior and illegal dealings. This oversight imposes requirements on those advising clients regarding insurance (agents of the insurance carriers).
How Much “Oversight” is Really There? Unfortunately- NOT MUCH!
Would you be surprised to learn that the “legal requirement” of a licensed insurance agent is often essentially the same “sales” process as your fast food order? In most states, the licensing bureau mandates that a licensed agent only “offer” the coverage. No more legal requirement is made of the licensed insurance professional, they must simply mention it to you to be protected.
Think about that for a minute. All an insurance agent has to do is simply “offer” the coverage, then, legal responsibility is satisfied.
Agent: “Do you want to buy utility services, off premises, indirect damage coverage?”
Client: “Well, nothing has happened, so we will stay with what we have.”
Client’s Unspoken Thoughts: “What is that? Sounds expensive? Is the agent trying to sell me something I don’t need? I hate this stuff…I hope nothing happens.”
Some states have set a higher bar for what consultation and advice insurance professionals must offer to clients. These higher-threshold states require fiduciary capacities, acting on behalf of another with its best interest. Fiduciary: A person or organization that owes to another the duties of good faith and trust. The highest legal duty of one party to another, it also involves being bound ethically to act in the other’s best interests.
Unfortunately, most states have the lowest requirement (simply offer coverage), Michigan being one. What is the legal threshold learned by agents in licensing? You simply need to offer it in some way, whether in writing, verbally, on a checklist, etc. If the consumer declines or does nothing further to request coverage, the legal obligation is met.
In times when coverage is not available when they need it, some clients have sued their insurance agents for “malpractice, errors & omissions in the selling and placing of insurance.” In 100% of the cases, price (cost of the coverage) is not why a client failed to purchase the proper protection. The reason that the client suffers an uncovered loss and sues? Their agent never offered it. With hindsight, price wouldn’t have mattered. The client feels wronged because they weren’t offered the coverage.
What’s the Point I Am Making?
Everyone wants to work with professionals to help guide decisions to best protect themselves or their business. People want options to consider the right insurance coverages, at a fair price. People expect a fiduciary relationship, regardless of the legal requirement.
Demand More From Your Agent & Advisory.
Work with an agent that has a process that is both proactive and consultative. At Brown & Brown of Detroit, we have various agency principles that guide us to help our clients come to coverage decisions that will best protect them. We have a culture, nationally, that supports our “assiduous attention to detail” and intent to always “do the right thing.”
If we are your agent now and you want to see more, call me. If you are not working with us, call me. We want to help people by offering a better way to buy insurance: the right way.
Call 586.977.6300 or visit us online at bbtex.wpengine.com. Afterwards, we can go have some fries with our insurance.