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Using Sandy to educate clients: insight: the storm revealed gaps in understanding of what insurance covers--and what it doesn't.

More than three months after Hurricane Sandy ravaged the Northeastern United States, things are slowly returning to normal, for some. But there are many lessons to be learned from those who were hit the hardest by the storm.

I recently discussed the storm response with some insurance department personnel who told me about phone calls they received in the days just after the storm. There were many, many calls from people who had lost everything and were in disbelief when informed that they had no coverage under their homeowners insurance policy. The exclusion of flood coverage from homeowners insurance is nothing new to those of us in the insurance trade. But to those who never anticipated this type of event, didn't know to purchase flood coverage from the National Flood Insurance Program and experienced significant damage, it's all too new, and painful.

There were also calls from those who learned, for the first time, what their policies covered and didn't cover. The recurring theme was a lack of understanding of coverage--what their policies included or excluded.

Coastal building, building density, increasing home values, anticipated changes in rebuilding codes post-storm, all coupled with the reoccurrence of significant weather-related claims, result in even more potential for significant losses, coverage gaps and mismatched pricing of risks. We all share responsibility to mitigate losses and adapt to these rapidly changing environments.

After a major event such as Sandy, and previously Katrina, awareness of coverage issues is increased dramatically and, accordingly, so is the disposition of insureds to understand these issues more thoroughly. As agents and brokers, now is the time to start a dialog with your customers and to review coverages to ensure adequacy. Ask your customers what they learned from the storm about their own coverages and where they feel they might need more. Asking these questions now will help prepare for renewal time. Things to consider:

* For personal lines: Flood coverages, gaps between homeowners and flood coverages, underinsured values, supplemental coverages such as food spoilage, loss of use coverage, separate structures, debris clean-up, renters insurance, deductibles, hurricane deductibles, and inadequate coverages. Have your customers performed a home inventory?

* For commercial lines: The best approach is to review the true business impact of a catastrophe, operational considerations, technology coverages, business interruption coverage adequacy, flood coverages, deductibles and property value coverages.

During a time when customers will be more willing to discuss the adequacy of their insurance coverages, the most valuable service an agent/broker can offer is a thorough review of coverages, including what's working and what's not, and to educate customers about their, coverages.

Best's Review columnist Dianne Batistoni is a partner with EisnerAmper in Bridgewater, N.J. She may be reached at dianne.
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Title Annotation:Agent/Broker Selling
Author:Batistoni, Dianne
Publication:Best's Review
Date:Feb 1, 2013
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