Front Page Articles
WRA, Insurance Representatives Meet on Homeowner's Insurance Issues
by Debbi Conrad
Representatives of the property insurance industry met with REALTOR
staff and brokers on October 24, 2003 to discuss ways of more
effectively educating consumers about the issues they may face when
they purchase homes and apply for homeowners' insurance. The insurance
representatives included underwriters, attorneys, and government
affairs representatives from insurance companies such as Allstate
Insurance, American Family Insurance, General Casualty Insurance,
Secura Insurance, Sentry Insurance, and West Bend Mutual. Eric Englund of the Wisconsin
Insurance Alliance, Corky Hellyer, Chairman of the WRA Board, and Bill
Malkasian, WRA President, presided.
Insurance Industry Overview
The meeting began with a discussion of the recent changes that have
occurred in the insurance industry. While at one time homeowner's
insurance was an unprofitable loss leader used to secure a consumer's
more profitable auto coverage, the historic stability in the
homeowners' market has disappeared. Factors such as hurricanes,
terrorism, mold and stock market declines caused insurance industry
investors to take a step back to assess these new age risks and
determine how insurance can be extended without sustaining huge
losses.
New age risks and modern technology herald the end of the good old
days of routine underwriting and low homeowner's insurance premiums.
Premiums should better match risks as today's insurers use more
sophisticated technology and have more extensive data to evaluate.
Consumers presenting risks will be charged at rates proportional to
the exposure rather than increasing rates across a whole class or
category of insureds.
Preparing Buyers for Homeowner's Insurance Issues
- Real estate licensees should develop working relationships with
local insurance agents.
- Timing is critical: homebuyers must begin the process of
contacting their insurance agent as early as possible.
• Buyers should ask their insurance agent about property conditions
and other roadblocks that might impede the buyer's ability to insure
a home at a reasonable premium.
• The buyer might ask the insurance agent for a copy of the
insurance application form to see what information will be needed.
• The buyer may want to obtain a copy of his or her CLUE report to
see if there is a reported detrimental claims history.
• Sellers should get a copy of their CLUE report when the property
is listed and repair any remaining damage.
• Buyers should ask sellers for a copy of their CLUE report and use
a CLUE report contingency if the CLUE report is not available.
• Insurance companies don't want to pay for an insurance inspection
until the buyer decides on a property and an insurer.
• Some insurers won't underwrite a policy until a couple of days
before closing because they want to make sure it will close.
• Some lenders expect a policy at closing while others accept a
binder.
• The authority of insurance agents to bind a policy is
changing-more often the company will conduct at least some
underwriting before the agent can issue a binder.
• Insurance companies will insure for the replacement cost of the
home, not the loan amount.
Property Conditions
As far as hot points that buyers should look for, the insurance
representatives reported that not every company reacts in the same
way. Some companies will still cover 60 amps, others will refuse
fuses, some don't use credit scoring, etc.
In cases of water damage, prompt mitigation by the owner is
critical. Some coverage may be available for mold resulting from a
covered peril, but there often is a dollar limit. Things will get
better as the science of mold evolves.
Modern appliances will likely overwhelm a 60 amp-electrical system
- a microwave could blow it out. While 60 amps might presently be
sufficient, future use of computers and more modern appliances will
make it obsolete. Fuses instead of circuit breakers are very dangerous
because they can be tampered with, i.e. pennies in the fuse box. This
is a major safety issue because most fire losses are electrical.
With respect to commercial insurance for multi-family properties,
current policies seem to have terrorism exemptions and there is a
reluctance to insure student rental property. The insurers indicated
that rental properties with five or more units generally are a niche
market where terms and conditions will depend upon reinsurance in the
secondary market (just like with loans). Many policies are placed with
the assistance of excess surplus writers and sophisticated insurance
brokers. Condominiums are also another niche market.
Credit Scores
The use of credit scores was briefly discussed, with the insurance
industry representatives maintaining that credit scores reveal
financial stability, one component considered in property insurance
decisions. Most insurers report that they consider credit scores when
pricing insurance products but do not use it as an exclusionary tool.
Pursuant to the policy of the Office of the Commissioner of Insurance
(OCI) in Wisconsin, credit scores cannot be used as the sole reason
for denying coverage. There also has been concern expressed that the
use of credit scores has a disparate impact upon persons with no
credit history including persons from other countries and cultures.
The OCI has indicated that a low credit score due to lack of credit
use must be neutral.
Developing Consumer Resources
REALTOR groups may work with independent insurance agents and the
Independent Insurance Agents of America, Inc. (www.iiaa.org)
to make more consumer education resources available through real
estate agents and insurance agents. Future consumer education projects
may include joint development by real estate and insurance groups of a
consumer checklist for homeowner's insurance, and a mutual Web site or
a shared Web page with homeowner's insurance information, a speakers'
bureau, and articles for periodic distribution to consumers and
brokers.
For additional homeowner's insurance information, go to
www.wra.org/insurance.
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Actions To Take Now To Guarantee 2004
will be the Best Year Ever
by Joeann Fossland
The last quarter of the year is when smart agents begin to plan the
coming year. By doing this planning, they start the new year with
their strategies and plans in place ready to be implemented. If you
want to hit the ground running in January and position yourself for
the best year you've ever had, here are the things you should do now.
- Plan when you will do your business planning for 2004. Set aside
a full day. Put it in your calendar now. You may want to schedule a
weekend away to do this or go to a formal Business Planning Retreat.
- Know your net worth and have an escape plan. The most powerful
planning is done when there is a correlation between your life plan
and your yearly plan. When do you intend to be financially
independent or want to retire? What will you need to do each year to
get there as planned?
- Gather all your numbers. Obviously you want to gather your
gross, your number of transactions, where they each came from. But
you also want to know what your hourly worth is, how many vacation
days you took, what your expenses were and what percentage of your
business came from each of your marketing activities. For each
dollar you save in expenses, you put $1 back in your pocket. For
each additional dollar you make in gross sales, you probably put
only 20 cents in your pocket. Determine how you want to impact the
net.
- Do some R&D and the restrategize where your marketing budget
will be spent. Don't assume what worked in the past is the key to
success in the future. Take a look at different models, such as a
menu of services or a strategic plan for converting FSBO's. The
expectations and needs of the consumer are changing rapidly. Are you
positioned to be giving them the value and services they want? What
new strategies could enhance your branding or reach within a new
niche market?
- Expand your sphere of influence. Add more people to your Team
100 -it's like a dance card with people in 100 different job
categories that are probably interested in adding new people to
their businesses. The average person knows 200-250 people and if
even 10% of those are moving this year-it is a big pool of
possibility. The average business person may know 2-3 times that
many. Find some angels who have the same high standard of doing
business that you do that want to send mutual referrals. Think each
day about who you can send a referral to.....
- Plan your 2004 vacations and time off. The time to enjoy and put
gas back in the gas tank can make the difference between loving what
you do and getting burned out.
- Plan your education and skills upgrade for 2004.What courses,
designations, and skills would allow you to serve your clients at a
higher level or to run your business more effectively. Plan to order
the tapes, attend the seminars and enhance your skills.
- Get a buddy or a coach. Whether you choose a formal coaching
relationship or ask another agent to be your accountability partner,
having someone to bounce ideas off of, to share your dreams and
vision with and to give you a kick in the rear when you need it can
make the difference between being ordinary or extraordinary.
- Plan to invest in real estate in 2004. Real Estate was the path
that 76% of the richest people in the country used to build their
wealth. Are you taking advantage of your knowledge and
opportunities? Did you know you could use IRA money to build your
retirement? One smart agent had as his goal to work 10 years, buying
an investment property each year and then retire with the cash flow
that he acquired. If you aren't investing in your product, why not?
Take a look over this list and timeframe for yourself when you will
take the steps listed above and then you'll be ready to kick things
into gear and enjoy the ride in 2004!
Copyright© 2003, Joeann Fossland. All rights reserved. For
information about Joeann's presentations, coaching and consulting
services, contact the Frog Pond at 800.704.FROG(3764) or email
susie@frogpond.com;
www.frogpond.com
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