Although 74% of financially successful individuals have personal liability insurance, many do not carry high enough limits—and 10% lack expanded liability coverage entirely, according to recent research conducted by Chubb and Oliver Wyman.
In an increasingly litigious environment, successful families are often targeted for their deep pockets, and judgments can be severe—for example, Chubb and Oliver Wyman report that over the last 10 years, 10% of financially successful families faced judgments of $100,000 or greater, while 3% faced judgments greater than $1 million.
“You only need to have one significant liability event for it to impact your financial stability,” says Noel Hannon, chief underwriting officer, Chubb Personal Risk Services. “And it can happen at any time.”
It’s also not only the wealthy who are susceptible. “Nearly every adult can benefit from having a personal umbrella policy, whether they have any assets or not, because judgments can attach to future earnings,” points out Eric Raudins, vice president, Specialty Personal Lines, RLI. “If your customer is 30 years old and doesn’t think they have enough money to warrant purchasing a PUP, consider a scenario in which they get in an accident with a school bus, are found to be at fault for the accident and are hit with a $1-million judgment. That will negatively impact their financial earnings for a very long time.”
But because nobody is requiring your clients to purchase a personal umbrella policy, it’s unlikely that they’ll walk into your agency asking you about the coverage. Instead, selling PUPs is “all about educating insureds on a consistent basis,” says Daina Kawchack Smith, chief marketing officer, PersonalUmbrella.com. “Awareness is still a drop in the bucket compared to auto, health or homeowners insurance. It cannot be a one-time conversation.”
Here are four ways to start the conversation—and keep returning to it:
1) “What does financial well-being mean to you?” Hannon encourages agents find out, because one size does not fit all. The discussion might focus on one or more of the following areas:
- Retirement savings: “You’ve worked as a family, you’re planning for the future and you have a vision of what you think that’s going to look like,” Hannon says. “What if something happens that puts those retirement savings in jeopardy?”
- Education and entrepreneurship: “If you have plans for yourself, your children or your grandchildren to help support either college or business endeavors, how could that be put in jeopardy?” Hannon points out.
- Legacy: “We look at this from a multigenerational perspective,” Hannon says. “What could be the potential impact beyond your immediate family?”
- Philanthropy: “What do you plan on doing from the perspective of charitable giving, and how might that be jeopardized?” Hannon asks.
2) “How much do you trust your peers?” Nearly 100 million U.S. residents are planning on taking a family vacation this year, according to AAA—and out of those four in ten adults, 53% expect to take a road trip. “Just from the perspective of the number of miles people are logging on the road, when you think about what can happen, it doesn’t even have to be that you’re at fault,” Hannon points out. “That’s an important discussion point.”
A PUP can provide extra uninsured/underinsured motorist coverage to protect your clients in the event of an accident with someone who either is not insured or does not have enough insurance. And that selling point should apply to almost every individual, Hannon adds, because “even if you live in an urban area and you don’t own a car, you’re likely to rent a car at some point.”
On a similar note, consider a personal lines insured who is active in their local community, serving on the school PTA or the board of their homeowners association. “If something were to occur within that venue, what exposure could you have?” Hannon points out. “Does that nonprofit board have insurance? If they do have insurance, what does it do, if anything, for you as a board member if you were to be named in a lawsuit?”
3) “Congratulations on your recent milestone!” Kawchack Smith recommends selecting three or four life milestones that could align with a higher need for a PUP—for example, adding a youthful driver, purchasing a rental property or retiring.
Then, “any time a CSR or producer is talking to a client regarding one of those scenarios, the conversation should always involve offering a PUP,” she says. “That helps the insured look at the purchase of a PUP in a different way than they did a year ago if they declined it at that time.”
4) “Are you absolutely certain you don’t want this coverage?” On that note, make sure you document in writing whenever a client declines a PUP. For the Big “I”-endorsed personal umbrella program with RLI, the Big “I” developed a PUP declination form, which you can download and use with each of your clients.
“The major benefit is it protects the agent from an errors & omissions standpoint,” Raudins says. “But it also makes the customer say, ‘Wow, this is important enough for me to have to sign and reject it? How much was that again? A dollar a day for $1 million of coverage?’”
The decline form isn’t meant to be a “scare tactic,” Raudins says. “But I do think there’s an element of seriousness to it. It makes the person stop and think.”
Jacquelyn Connelly is IA senior editor.