There are several insurance brokers that offer rain and other weather insurance products, but how do you know which one is the best choice for your needs? There are a few potential pitfalls you should be aware of to help you choose the best insurance broker for your needs.
Beware of brokers who offer rain insurance only on a surplus lines policy
If your insurance broker is only able to offer rain insurance on a Lloyd’s or other non-admitted insurance carrier, then you should take notice. In the United States, there are several insurance carriers that offer weather insurance on admitted policies. What’s the difference? With an admitted policy, the language of the policy and the rates charged have been reviewed by your state’s insurance commissioner and deemed to be consumer-friendly. Moreover, if the carrier were to become insolvent, the state has funds set aside so that your claim will be paid. With a non-admitted carrier (also referred to as a surplus or excess lines carrier), the policies are not standard and approved by the state, and there is no access to funds for claims should the carrier become insolvent. How can you tell if you are being offered coverage with a surplus lines carrier? Except in Kentucky and New Jersey, if you are being charged a tax, then your coverage is being placed with a surplus lines carrier.
Most states have laws that surplus lines carriers may only be used if no such coverage is available in the admitted market. And because all states have at least three admitted carriers that offer rain and other weather insurance policies, if your broker is not requesting quotes from those carriers, then they may be placing you at risk and violating state statutes. The case may very well be that the broker simply does not know of available coverage through the admitted market, or, which is more often the case, the admitted carriers may not care to do business through certain brokers because of past actions or incompatibility. Either way, it is usually in your best interest to steer clear of any broker that offers coverage only through a surplus lines carrier.
Beware of brokers who do not listen to your concerns before recommending coverage
You need a broker that listens to your needs. Plain and simple. Therefore, you need to ask yourself a few questions: Does your broker discuss rain insurance with you, or is it simply just a renewal of the same policy year after year? Does your broker ask me any questions about my event? If not, how does he or she know what may be the best coverage? Does your broker suggest changes or alternative coverage options? If not, why not? Rain insurance coverage for an arts festival may be very different from that of a tractor pull or a music concert. You broker should be able to offer you more than one solution for you to consider. If they are not, then it’s time to look elsewhere.
Beware if the rates you receive cost much less than rates from other brokers or agents
We all like to receive goods and services and the least possible cost. However, if one broker or agent is offering coverage at a price that seems too good to be true, it just might be.
When you’ve been around as long as Spectrum, you see many brokers come and go. These brokers see weather insurance as a way to make a quick buck. Usually, coverage is offered at rates that are far below the current market in an effort to establish a significant share of the market, and then one of two actions usually follows. One outcome is that the company is hit with more claims than expected, and the premiums collected may not be enough to pay the claims and remain profitable. When that happens, the program is usually withdrawn and the company moves on to the next best thing. Alternatively, after collecting a large enough portion of the marketshare, the company begins to increase rates year after
year. After two or three years, your premium, which was the lowest available when you started working with the company, has now increased by 20 to 30 percent, even if you’ve never filed a claim.
Beware of brokers who obtain only one quote
This is a very common occurrence. It typically happens when a call is made to an agent that either rarely places rain insurance and knows of only one market, or when an agency refers to themselves as a broker but in reality they are aligned with a single carrier.
This is a common occurrence when a fair or festival calls on a local agency to obtain their rain coverage. This agency may provide automobile, health and crop insurance to many members of the community, but when it comes to rain insurance, it may be their only placement each year. Therefore, it doesn’t make sense to spend the time to seek out new markets when the easy option is to just place the same coverage as the year prior. Many times, the agency is a sponsor of the fair or a member of the chamber of commerce, and, therefore, the desire is to keep the business local. But that may not be in the best interest of the festival. If there were a disputed claim, does the agent have the relationship with the carrier that will hasten its resolve? Probably not.
Another reason you may only be offered one quote is because the broker only works with one carrier. They may very well have access to more than one carrier, but choose to place the majority, if not all, of their business with a single carrier. This makes it easier for the brokerage to provide quick quotes and then hope that they bind the account — the so-called churn and burn approach. Another reason for this could be that they are truly aligned with only one carrier, and may only place coverage with that carrier via an exclusive agreement.
Beware of brokers who insist you use an airport for rainfall verification
We are still baffled by this one. For years, the option of an independent weather observer or the use of Doppler-indicated rainfall has been available, but when we discuss past coverage with our clients, they insist they were never informed of these other options, and they were forced to use an airport located several miles from their event. Unfortunately, we are usually having this discussion the year after their event got drenched and there was no rain at the airport. If you are not offered rainfall verification options other than the nearest airport, it should be a red flag, and you should seek coverage elsewhere.
At Spectrum, we pride ourselves on being an active participant regarding your rain and other weather-related insurance needs. We have great relationships with our carriers, and even better ones with our clients. We listen to them and make suggestions based on their specific needs, and always seek those coverage options from more than one carrier. Most importantly, we are there when you need us most: when you have a claim. This approach has made Spectrum the most successful weather insurance brokerage in the United States. Simply put, we do weather better. Contact us today to discuss your needs and get coverage you can trust!
