Columnists Bob Carroll “Shopping” insurance: When should you do it? What should you look for? Is the price the only thing to consider?

“Shopping” insurance: When should you do it? What should you look for? Is the price the only thing to consider?

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Rhoda Lyte had an insurance policy for her retail jewelry store that excluded coverage for all property that was in showcases.

Her policy may have been intended as burglary (night time) coverage alone, but Rhoda wasn't aware of that, and she had not asked for just "burglary" coverage. If she had had an armed robbery, only merchandise that happened to be lying on top of tables or showcases would have been insured.

Rhoda's agent was a good social friend, but Rhoda's was the only jewelry business the friend had ever insured.
Alexander Wright had a jeweler's insurance policy that covered property in his store which was valued at several hundred thousand dollars. The policy deductible on any loss was ... $1,000,000 (one million dollars)!

He would have to suffer a loss of more than twice the amount of property he had - just to meet the deductible. The agent was inexperienced in writing insurance coverage for jewelers.

Like an old "Dragnet" episode, "the names have been changed to protect the innocent" - but the policies just described are real.

In a situation like one of these, would you be comforted in knowing that you had the lowest insurance rates available? Ironically, neither of the policies above was particularly inexpensive; in fact both "Rhoda" and "Alexander" were eventually able to get proper insurance coverage for less money.

When it comes to "insurance shopping," you will hear jewelers with opinions ranging from, "we put our insurance out to bid every year;" to "my agent is a personal friend and I could never move my coverage."

Bidding out insurance, or any commodity, implies that cost is the most important if not only consideration; and to some, it may be.

But is cost really the "bottom line?"

If you need assistance in legal matters will you look for the cheapest attorney, or will you ask, "who has expertise and experience in the issue at hand?"
Did you make certain that your CPA or tax advisor has the lowest rates in town? Or did you seek out someone who would understand your business and was perhaps recommended by another business person whose opinion you trust?

And for personal health, do you make certain you have the doctor with the lowest rates? And for serious medical treatment or surgery, would you want the cheapest specialist or surgeon? - Or is your health too important to place in the hands of an amateur or medical trainee.

In matters of importance most people, jewelers included, want the best professional for the job, and the cost is secondary to having good service and advice.

And the jewelry industry is no less professional than any of these who help us to be successful in our businesses. Jewelry is an industry of trust, and knowledge, and ethics. The American Gem Society (AGS), the Gemological Institute of America (GIA), the American Gem Trade Association (AGTA), and Jewelers of America (JA) are just a few of the industry's organizations that speak to the professionalism of the jewelry industry in America.

Jewelers who want to be known for their low prices still emphasize quality and value in their merchandise, along with a good (fair) price. I have never seen a door sticker that proclaimed, "We are proud members of the CJA - the Cheap Jewelers Association."

And when the consumer shops for tangible goods - jewelry, jeans, or Jaguars - smart shoppers generally look for the best value in products that will meet their needs, not just cheap prices. And those are the customers with whom many jewelers like to work.

The insurance industry, like the jewelry industry, is very competitive - throughout the general insurance world and certainly no less so in the complicated field of jewelers' insurance. Just as someone can always sell a diamond or watch cheaper than someone else - somebody can usually sell an insurance policy cheaper. And the question is, is cheaper always the insurance to buy?

Consider that the process of providing insurance is or should be as much a profession as those mentioned in the beginning of this article - as is the profession of making, selling, repairing, and/or appraising jewelry - and that a competent insurance agent, like an accountant or attorney, can be an important part of a jeweler's business team. Jewelers Block (the insurance staple of the jewelry industry) is a very complex insurance product and is often considered a specialty area of the insurance profession.

Like the two astronauts seated in the control module atop the towering rocket about to take them into space; there is little comfort in knowing that everything you depend on was contracted to the lowest bidder. A jewelry business, especially your business, is too important to be put in the hands of inexperience, no matter what the price.

So all that being said, one indicator that it may be time to reevaluate your insurance coverage is the feeling that the person you look to for insurance advice lacks knowledge or experience in writing Jewelers Block insurance, or that your business is somebody's "training ground."

Another indicator is that the premium does not appear to be "fair" in relation to the risk. Note that because exposures, coverages, and security differ among jewelry businesses, it may not be helpful to simply compare your insurance premium with another's.

"Our plan is to sell all our jewelry at 10% below cost - and make it up on volume!"

A jeweler expects to make a profit, indeed must make a profit in order to stay in business. And likewise, if an insurance company is not profitable in the long run, it too will fail.

That does not mean that every policy or every customer must be profitable on its own - in fact the very nature of insurance is that individual losses often exceed the premium of those accounts; but still, it is a goal of an insurance company to remain generally profitable in a very competitive environment.

So with these things in mind, if it seems appropriate to check for other insurance, here are some tips:

  1. Forget the phrase "apples for apples" comparison. Remember that shopping for insurance is all about getting better service, better coverage, and meeting your specific needs - and getting all of that for a fair price. A different set of professional eyes looking at your situation may see a need for more coverage in some areas, less in others, or in adding important coverages that you lack - and isn't that the kind of professionalism you really want?

    If you request a quote from another agent, don't just ask that agent to "copy" your policy (in fact, you should not provide it) - ask the quoting agent to form recommendations and a quote on the basis of your needs as he or she sees them.

  2. The agent. The agent is a jeweler's most direct connection with the insurance company - the person he or she will see or talk to regularly about needs, coverage, and service through the year.

    Does the agent know Jewelers Block insurance and is he or she able to answer your questions competently and accurately?
    "I'll have to get back to you on that," is better than guessing or giving misinformation - but is it a phrase that is used too often? A competent agent should be able to answer your questions.

    Is the agent experienced, not just in years but in the jewelry industry?
    Although everybody has to start somewhere, you don't want your business to be somebody's "training ground." Ask for references in the form of other jewelers.

    Agent, broker, or company rep?
    A representative is a direct employee of a particular company; an agent or broker is an independent professional who may have contracts with several insurance carriers. A rep is generally paid through salary and benefits from the employer company; an agent receives commission from the companies whose products he sells. A company rep is sometimes a salesperson only, referring all service questions to the home office. Fair questions to ask might be, "where will the person's loyalty lie," and "who will put my interests first and foremost?"

    Does the agent demonstrate an interest in helping you prevent losses?
    CrimeFax, security alerts, and similar bulletins; speaking to you and your employees about security procedures; calling you when there is eminent risk, are ways that an agent can help you prevent losses and help you keep your insurance costs reasonable.

    Is the agent licensed to do business - in your state?
    Insurance licensing laws are in place to protect you, not the insurance industry. Never discuss insurance issues with a person who is not already licensed to write insurance in your state. Quoting coverage and then applying for a state non-resident license only if successful in the sale (if at all) is illegal. Selling insurance as a "consultant" to avoid licensing is illegal. (Can you trust a person who does not respect the laws of his or her own industry?)
  3. The company and the product. The insurance company itself is where premiums are set and claim decisions are made - and where the money for a claim comes from. You want to know that you are dealing with a carrier you can rely on.

    How dedicated is the carrier to the jewelry industry?
    Is the field of jewelers insurance a primary focus of the company, or is it a sideline similar to the jewelry department of a department store? A sideline product can come and go as the market and profitability dictate.

    What extras does the company offer that are important to you?
    Does the company try to meet important industry-specific needs, such as shipping and off premises coverages, trade shop coverage, employment practices coverage, personal insurance for customers' jewelry, etc.? Does the company's policy insure your customers' property that is in your care on a primary basis, or is coverage effective only after the customer files a claim with his or her own insurance carrier?

    Does the company help you prevent losses?
    such as by providing loss-prevention training tools for you and your staff, paying your membership dues to crime-prevention organizations like the Jewelers Security Alliance?

    Is the company a part of the jewelry industry in the broad sense?
    Look for affiliations or alliances with major national organizations of the American jewelry industry, and direct involvement with your own local associations.

    Is there a relationship in place?
    How do you feel when you talk directly to the company such as to an underwriter, or when you need after-hours assistance? If you've been with the company for a long time, does the company seem to recognize that; or are you just a policy number?

    Is the company an "admitted carrier" in your state?
    An admitted carrier falls under the jurisdiction of your own state insurance department, meaning that all forms, coverages, and rates, as well as sales and claims activities, are locally regulated. And thus your insurance department can be a source of help if there is a problem. Insurance through a non-admitted carrier may pose special challenges in terms of underwriting, claims, disputes, and litigation.

    With an admitted carrier, the premium is the only price you pay. Non-admitted carriers (aka "Surplus Lines insurance") often have add-on charges such as state taxes, brokerage fees, and inspection fees. Some states require that insurance be placed with a non-admitted carrier only when "admitted" coverage is not available.
  4. Can insurance be too cheap?
    Do insurance companies ever fail, as a result of misjudging the market or pricing their products too low? They do; and you may be able to think of a few recent examples.

    And does that affect the insurance buyer?
    A struggling or failing insurance company can have a hard-line approach to claims, perhaps tending toward stringent requirements and tight interpretations of policy language. And if a company goes into "receivership" (i.e., is taken over by its state insurance department) policies can be cancelled with little warning and without refund, sending insureds scrambling to find replacement coverage - facing the double jeopardy of higher new premiums coupled with loss of premium from the failed carrier.

    And there can be additional complications if there is a lender or landlord named "additional insured" as a condition of a mortgage, loan, or lease.

    So it may or may not be time to re-examine your insurance coverage. If you have confidence in your agent and your company, and you have a premium that is both fair and reasonable, there is nothing wrong with staying just where you are.

    If you feel you need to shop your coverage "just to keep the agent honest," then you probably need to find an agent you trust.

    So whether you feel you should check for other coverage or not, remember to look for a professional insurance advisor and not just a policy peddler, and understand that both the agent and insurer are critical aspects of your business. You want to feel a strong sense of confidence in both - and at the same time, be charged a fair premium.

    A philosophy of switching companies or agents just because one carrier may be cheaper one year than another is both time consuming and risky. As one jeweler and friend has told me many times, "insurance is all about peace of mind - and being able to sleep at night." [Howard Cunningham, Tulsa, OK]

Bob Carroll of Robert G. Carroll and Associates is a Certified Insurance Counselor who has been serving the jewelry industry for more than a quarter of a century -- an independent agent representing Jewelers Mutual and other quality carriers in Oklahoma, Arkansas, Mississippi, and Tennessee. "Jewelers isn't just what we do, it's all we do." You can contact Bob at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

 
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