Gaps in coverage and uninsured losses occur for a number of reasons. Most policyholders are not in the insurance business. They have a very limited understanding of the product they are buying and how risks they face may be insured. In Property Insurance Resolutions for 2010, which follows Concerns and Resolutions for Property Risk Management in 2009, published in the IRMI.com, William Austin makes the following observations:
An inexpensive property insurance policy that does not cover claims as thought or bought prior to loss becomes is a very expensive insurance policy…We must remember that cost of risk includes uninsured loss whether subject to deductible, exclusion, inadequate limit or improperly placed coverage.
There is more to property insurance than simply the major categories of building, contents and business interruption. What about all the various sublimits and nuances within the grants of coverage? A 2010 New Year?s resolution for risk management professionals is to make time to understand what makes up the complete property insurance policy… The sum of all property loss exposures must be understood in order to create a sound property insurance policy that is loss effective as well as cost effective.
Many of the problems uncovered during an insurance policy review are not from complex issues but simply from the risk management professional from not spending enough time to understand and arrange the basics of coverage.
Austin’s article is worthy of reflection by anybody involved in commercial insurance coverage issues. He provides a checklist of items he feels are important and should be studied for 2010. One of the reasons that I endorse the use of the IRMI.com, is its extensive use of checklists for coverage. Any professional involved in selling or advising about property insurance cannot reasonably do their job without a heavy reliance on such checklists. Otherwise, too many coverage issues will simply be missed and uncovered losses or gaps in coverage will occur.
Policyholders should find a trusted insurance professional who has the experience and understanding of how to properly insure risks unique to them. I often remind my clients that "cheap" insurance may be a lot more expensive when a claim occurs and coverage is excluded or benefits limited. When it comes to insurance coverage, as it is often in life, you generally get what you pay for. As Austin warns, with insurance coverage:
The devil is in not knowing the details. Coverage needs to mirror exposure whenever possible. All property risk management details must be understood prior to policy inception: peril, exposure to loss, values exposed and minimum coverage limit. Numbers used in any insurance policy to express a coverage limit, including sublimit, must be analyzed to ensure adequate coverage at time of loss.