Half of Quebeckers Do Not Have Their Property Re-Evaluated at Renewal Time
PROFESSIONALS MUST PLAY THEIR ADVISORY ROLE AND CHANGE THIS SITUATION.
The Act respecting the distribution of financial products and services requires damage insurance agents and brokers to take the necessary steps to ensure that the coverage provided corresponds to the client’s needs.1 Reality, however, tells a different story.
One problem is that insureds do not always know what they need to declare. Is it important to mention your new spouse or that you have changed jobs? Do you have to say that you occasionally do home swaps with strangers? Furthermore, half of insureds are not familiar with all of the inclusions and exclusions in their insurance coverage, nor do these insureds understand all the aspects of their contract.2 It is therefore difficult to verify whether a contract meets the insured’s needs. It is even more worrisome to note that 57% of insureds do not have the value of their property reassessed before renewing their insurance, nor do they verify that their coverage is still appropriate.3
Representatives are well-positioned to educate insureds on the importance of contacting an agent or broker when major changes occur. The ChAD has developed a variety of informative, consumer-focused articles that representatives can give their clients. For instance, the “Ten Questions to Ask Yourself When Renewing an Insurance Policy” tool may be useful to both representatives and insureds. Representatives must nevertheless also ask certain routine questions in order to propose appropriate coverage to their clients.
THE DUTY TO ADVISE, EVERY STEP OF THE WAY
When drawing up an insurance policy for the first time, when renewing it or at any time during the life of the policy, representatives have a duty to advise and inform their clients. Furthermore, it is important for them to tailor their explanations to the client’s level of understanding and specific situation.
At renewal time, representatives must specifically inform their clients of any exclusions or limits in the contract and explain what they mean; they must not assume that their clients are aware of—much less understand—such information. If it is not possible to review each of the exclusions, it is nevertheless reasonable to expect than the exclusion concerning water damage be discussed, given the frequency of such claims. If, for instance, the client mentions that he enjoys biking, there is every reason to remind him about limits related to bicycles.
Damage insurance agents and brokers must also make sure that coverage previously offered to the client but refused has not subsequently become necessary. Perhaps there are also new products that could meet the client’s needs.
AN ANNUAL NEEDS ANALYSIS?
In order to properly advise their clients, representatives must analyze the insured’s needs at renewal time just as carefully as they do when drawing up a new policy. Not only does this analysis allow the representative to reassess the overall risk and ensure that the current coverage is sufficient, but it also enables the representative to avoid repeating past mistakes.
Representatives must therefore take the necessary steps to contact their clients (to find out more about this topic, please read “Renouvellement : tout savoir sur les moyens de communication requis” [in French only] under the “Renouvellement” tab at chad.ca/outils). Representatives need to have this conversation with certain categories of clients every year. Due to high volume, however, it may sometimes be difficult to speak to every client once a year. Ideally, representatives should do so at least periodically. If their firm has not established a specific procedure, representatives may decide, for instance, to contact a third of their clients every year.
You may want to use other criteria to determine how often is appropriate. You could, for instance, target certain risks, such as the difference between the values indicated in the contract and the amount of insurance. Let the computer help you out: use a programme that automatically generates a list of clients who have not been contacted in a while.
OTHER MEANS OF COMMUNICATION
If representatives decide to contact their clients in writing, they must make sure the letter they send is crystal clear. Asking a question such as “Over the past year, have you acquired anything or found yourself in a situation that could have an effect on your coverage?” is not enough. Since insureds often have no idea what might affect their coverage, you must give concrete examples: Have you had a spa, sauna or pool installed? Have you changed jobs? Is someone new living with you? Do you have new pet? Have you bought a new computer?
The ChAD has created model renewal notices for its members in the form of lists of questions that can even be tailored to clients’ specific needs. These models are designed to encourage clients to understand the importance of calling their representative to notify him or her of any important changes to the risk that they may not have previously thought to mention.
Representatives must keep in mind that as damage insurance specialists, they play a valuable role in advising their clients. The advisory role is therefore not only an obligation but also an important aspect of the representative-client relationship—a client who receives good advice is usually a satisfied client.
A procedure to guide representatives
A representative’s obligations do not end with contacting the client. Representatives must also make sure to send out the notice of renewal at least 30 days before the policy comes into force. They must verify beforehand whether the policy reflects the client’s instructions and the changes requested, in addition to ensuring that the document is free of errors and that the terms of payment are correct. To help damage insurance professionals respect all their renewal-related obligations, the ChAD has created a procedure, as well as five model insurance renewal notices for members to use:
The automobile and home insurance renewal notices have been reviewed to include questions related to the sharing economy—a phenomenon that is here to stay and that representatives need to understand.
1. Section 39.
2. Léger poll of 500 Quebeckers aged 18 and over, conducted for the ChAD in January, 2016.
3. Léger poll of 1,000 Quebeckers aged 18 and over, conducted for the ChAD in May, 2016.