For an agent looking to enter the environmental insurance market, here are four tips to ensure you provide the coverage your client needs.
Environmental and pollution claims can result in catastrophic financial consequences for any business, which means it's essential to make sure the policies you sell cover a client's risks.
A problem for many agents and clients in this market, however, is the fact that there is no “standard" environmental coverage form. As a result, carriers present numerous policy forms with differing definitions and exclusions attached, leaving agents with an uphill battle to acquire the right coverage for their clients.
“The terms of the policy matter," explains Mary Ann Susavidge, chief underwriting officer, environmental, AXA XL. “It is certainly important for the broker and the insured to review the coverage parts that matter to them."
The difficulty arises when, at the time of a claim, the insured believes they have purchased a coverage that they haven't. Clients—and even agents—are often mistaken in their belief that environmental coverage is covered under a general liability or property policy.
“In terms of gaps in coverage, I think it's more important that the broker and insured understand the coverages that are afforded by the policy that was purchased," Susavidge says.
For an agent looking to enter the environmental insurance market, here are four tips to ensure you provide the coverage your client needs:
1) Educate yourself and your client. There are numerous opportunities for agents to educate themselves on basic environmental coverage, regulations and cleanup costs.
“The U.S. Environmental Protection Agency website has excellent information on environmental exposures and the issues around them," says Stacy Brown, president and CEO, Freberg Environmental Inc. “The EPA ECHO database is also a great resource for agents to locate potential customers within a specific zip code—if a facility manages a hazardous material, it will more than likely appear on the EPA database."
There are also numerous environmental regulations that companies must comply with where noncompliance could result in fines, penalties and legal actions by environmental regulators or third parties.
2) Comprehend your client's business. A good broker will know exactly what type of business the client has. “There are a lot of times when you don't even realize that the insureds have an oil tank in their complex, for example," says Frank Viola, commercial environmental program manager, New Empire Group Ltd. “It's important to know what types of exposures your client has and letting them know what options are out there for their type of business."
“Over 1 million facilities in the U.S. manage and dispose of hazardous materials and the environmental insurance market only covers a fraction of those facilities," Brown says. “In my opinion, the marketplace is still underserved, and many opportunities exist for agents to help their customers find coverage."
3) Know the technical side of the business. “Not knowing what you're securing for your insured means there's a possibility you could leave coverage on the table, leading to a coverage gap," says Jeff Slivka, president, national environmental and construction professional liability practice, RT Specialty.
“It's really important for an insured to be speaking with somebody who both understands the policy and understands environmental liability more generally," Susavidge agrees.
While environmental insurance isn't a frequently sold line of business, presenting claims examples can help a client understand a potential loss event.
“If we quote something, we probably have a claim example that we could partner with that," Susavidge says. “An agent needs to recognize that they may not sell the coverage the first time. I've seen cases where you introduce it three years in a row and the client starts to wonder. They know that if they have a loss, they could potentially have purchased insurance for it."
4) Get ahead of renewals. Getting ahead of renewals and discussing an account early can help an agent lock in the exact coverages a client needs.
“For new business and renewals we make sure we understand the philosophy of what carriers and underwriters are thinking, such as if anything is changing within their appetite and what they are going to need," says Sarah Wirtz, national environmental practice leader, Risk Placement Services. “As there are so many moving parts within the industry in general, we want to make sure that we're staying ahead of it and being as communicative as possible."
Olivia Overman is IA content editor.