Can Insurance Agents Increase Coverages in Face of Impending Danger?

forest fire close to homes

Late on a hot summer afternoon right in the middle of fire season in North Idaho and Western Montana an agent preparing to go home for the night received a frantic phone call from one of his clients. He reluctantly picked up the phone and the following conversation ensued:

Client: Mike, please increase the coverage on my home right now.

Mike: Well, we went over your insurance just two months ago and you felt it was adequate then. Have you added some addition to your home?

Client: No. But we weren’t in the fire season then.

Mike: Can you come in tomorrow so we can do some calculations, get your signature and collect the additional premium?

Client: Mike, you don’t understand. I mean I need it right now as we speak ‘cause I can see the flames of the forest fire coming over the ridge just west of my home and it is headed my way!!

Mike: I’m sorry, I just can’t do that. I would suggest you pick up some of your most precious belongings and get out while you can.

True story names changed to protect the innocent. What should the agent do? As much as the agent would want to be the knight in shining armor, he acted according to his contract with his insurance company and his own ethical underpinning. Being an agent for a specific company or companies requires the agent to look after the best interest of his company and not put them in a position of adverse selection. As much as one would want it to be different, our capitalistic economy revolves around being profitable and the agent system requires the allegiance of an agent to his or her company to keep them so.

Sometimes a decision is a balancing act so the agent does the best job of field underwriting he or she can do and then submits the application for coverage where the home office underwriters with their set of guidelines completes the process and offers a policy to the buying public. No agent has any authority to change company procedures or policy coverages. This can only be done by Home Office personnel in conjunction with State Department of Insurance. Agent is the go between and never the final authority.

Insurance coverage must be treated like a parachute–you can’t order it up as the plane is coming down.

We are again in the middle of the fire season and people living in the beautiful forested areas of our communities have a heightened concern for the safety of their homes and property. Most local insurance agencies have literature you can get which discusses fire and fire procedures for keeping yourself and your loved one safe. It is amazing how a little fire protection like cutting weeds back from foundations and limbing trees a little higher up on the trunk can minimize a fire loss.

Having said what I did above, there will still be individuals who think insurance companies only want to make money and are not interested in watching out for them. Again, the balancing act plays a role. As an agent, I often and still do wonder why insurance companies continue to write insurance in areas where they are always prone to loss i.e. unprotected areas in forest and range land, flood zones, high crime rate areas, etc. Look what is happenings right now as this article is being written–thousands upon thousands of people being evacuated from areas which have been flooded before or have had huge losses due to hurricanes.

The only justification I can see from any of this is the social and marketing issue driving insurance carriers to provide coverages to cover mortgages and other sources of potential loss. Mortgage companies will not lend money on properties which cannot be insured adequately. Government has also put its nose in saying you cannot use any discriminatory factors which limits the buying public’s access to coverage. Actuaries somehow factor into the premiums the actual losses and the potential losses from these risk sources along with other insurable perils to meet the demands of society.

Be safe and as Smokey the Bear would say while pointing his paw finger at you, “Only you can prevent forest fires!”


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