It’s not everyday that I get asked to provide content for newsletters, so let me start off by saying I am honored to share my knowledge and experience with this audience. With this series, we are going to focus on a topic that may not be very exciting, but if understood properly, can make a huge impact on your business and your personal life insurance. Throughout this series, we are going to cover a lot of information. I don’t intend to bore you. My purpose is to explain things in such a way that you not only understand the insurance concepts better, but that you will be slightly entertained as well. 

First, allow me to introduce myself. My name is Rachel and here is my nitty gritty: 

• I am a graduate of University of Minnesota, B.S. Scientific & Technical Communication, Emphasis in Law, Minor in Political Science. 
• Prior to insurance, I worked in a Personal Injury attorney’s office working on car accident and medical malpractice claims. 
• I began my insurance career in 2011. 
• I currently hold my insurance license in Property, Casualty, & Life in the state of MN. 
• I held my Accident & Health license in the state of MN for about 3 years. 
• For most of my career, I was in customer service and sales, however, now I am on the claims handling side of the industry. 

Now that you know my stats, what does this mean for you? It means that what I am here to do is simply share my knowledge of the industry with you. Given that I am no longer in a selling capacity, I am not here to sell you anything. I have over 10 years of experience in the industry, and I want to simply share this information with you. If you’re like me, you get frustrated when you google something, click on a link, only to find the most basic information about the subject or find that it was simply clickbait so they can try and sell you something. You won’t find that here, I wouldn’t do that to you. This is going to be real substance. For our first article, we need to start with the basics of insurance and as we move through series, we will build off each new article and leave you enabled to make educated insurance decisions. 

Believe it or not, insurance goes back to the beginning of time. It can be traced all the way back to Babylon. However, the beginning of insurance as we know it began in England in the 1600’s. Lloyd’s of London, was a major influencer, beginning as insurance for the ships that were sailing the seas. They eventually added property coverage. Lloyd’s of London still exists today. Benjamin Franklin, a true entrepreneur of his time, organized the first American insurance company. 

At its core, insurance is simply a risk management strategy. You pay a given amount of money to purchase protection against some sort of unforeseen loss. When an insurance company sells a policy to a customer, the basic question they ask is “How much do we need to charge to cover this specific asset in order to maintain the operations of the company, still be able to cover the loss in the event something happens, and turn a profit?”  After all, insurance companies are not banks. If you want to save your money for a rainy day, call the bank. The question for the consumers then becomes, “How much am I willing to spend to get the promised amount of money back in the event of something happening?” And remember, this can be translated to “How much money am I willing to give the insurance company simply for peace of mind that I am covered and I may never collect.” 

Of course, this explanation is over simplified, but when thought of from this perspective, you can come to conclusions about your insurance budget, what you choose to have covered, and have a better perspective when writing that monthly check for your insurance premiums. 

Insurance has certainly made its place into mainstream media and has had its fair share of wacky commercials. How are you to know who to trust and what company is the best to work with? My first bit of advice, take reviews from the internet with a grain of salt. Not only are there two sides to every story, but, other than the time Amazon offered you a $5 gift card for a 5 star review, how often do you leave a positive review about anything? Probably not as often as a bad one. People are more likely to leave reviews when they are upset, leaving you to only read the bad things people say about companies. 

My second bit of advice is to find an agent you like and work well with and stick with them! Not only will you build credibility with the company, you may also obtain better rates. When you build a relationship with your agent….You build a relationship – one where the agent looks out for your best interests. 

There are different types of agencies out there. There’s a captive agency. This means the agent represents only one company. These companies are typically associated with major brands – ones that  have national TV commercials utilizing big name celebrities and mascots. On the other hand, there are independent agencies. They represent several different companies. They can quote your policy with the different carriers they represent, but still maintain you as a client if you change to another one of their carriers. There are benefits and downfalls to both types of agencies. With independent agencies, they can shop around and get you the best rates, however, when your policy gets moved around, a long lasting relationship with any one carrier cannot be built. An independent agency also has many companies that are constantly competing for their business. There are other reasons that may influence independent agents to go with any given company; being one policy away from a big bonus with Company A, Company B needs a better loss ratio (premium written compared to the amount paid out in losses), or maybe Company C needs more premium or they will drop the contract. A captive agency is limited in their options, but because they only represent the one company, they know the company very well and have good relationships with all the different departments. 

No matter which agent you use, I guarantee one question they answer frequently is “Will this claim affect my rate?” This question is more complicated than one might think, and it isn’t as black and white as one might hope. There are many factors that go into insurance rates. Rates are determined by actuaries and statistics. It’s possible your rates were going up regardless of the claims due to the weather in your area, or an increased crime rate in the area. Your credit also plays a role in your insurance rates. Have you filed any claims before? If you have, how recently? How big were they? Have you made any changes to your policy that might affect your premium? Several small claims within a few years may be viewed with higher scrutiny than one large claim within a 15-year period. They refer to that as a frequency issue. The company starts to wonder what changed recently that you are starting to file these smaller claims, have you come into financial troubles, not kept with regular maintenance, or are there any other moral hazards?  With different factors coming into play, it’s impossible to predict whether a claim in question will affect your rate. It would be nice for us all to have a crystal ball, but instead, the most important thing we can do to contain price increases on our insurance policies is use discernment when filing claims. If you are only going to net a few hundred dollars, you may want to pay the out of pocket rather than filing a claim, just in case you need it for a much larger claim later. 

We’ve covered an insane amount of information here today. What’s coming up next? We’ll do a crash course on Commercial Insurance. From general liability to property and workers’ compensation, next time, we will dive right in! You can follow me on social media by searching for “Cover Your Assets by Rae” or @CYAbyRae. 

Sources: https://www.britannica.com/topic/insurance/Historical-development-of-insurance

Rachel Lueth has contributed to this article in her personal capacity. The views expressed are her own. All information provided is for informational purposes only. Because the information in this article is based on opinion and experience, it should not be considered professional advice. These ideas should be discussed with a licensed representative in your state. Every effort has been made to provide information that is current and accurate. Nevertheless, inadvertent errors in information may occur and the author makes no guarantees of completeness, accuracy, or usefulness, whether express or implied. The information contained in this article shall be used at your own risk and the author is not in any way whatsoever, responsible for your use of the information contained herein.