Our associate editor, Mark Ruquet, came up with a brilliant column in this week's edition of NU, speculating on how differently life might have turned out for Sen. Trent Lott and the insurance industry had the Mississippi Republican--who lost his house in Hurricane Katrina--gotten his coverage through an independent agent rather than a direct writer.
Mark's key point (click here to read his complete column) is that while Sen. Lott had flood insurance (and collected on his policy), if he'd gone to an independent agent, he might have been more likely to have been counseled to get excess flood coverage from a private carrier, which would have kicked in after his federal insurance had maxed out, leaving him well short of what he needed to replace his home.
Had the senator had such excess coverage, Mark suggests, he might not have gone ballistic after his homeowners' carrier--State Farm--declined to pay for any damages because of the standard flood exclusion and anti-concurrent-causation language in his policy.
Besides suing, that cold shoulder prompted Sen. Lott to use his position as a U.S. senator to make life miserable for the entire insurance industry. He slipped a provision into the funding bill for the U.S. Department of Homeland Security mandating a study of Katrina claims-handling, and he has led the charge to revoke the industry's federal antitrust exemption under the McCarran-Ferguson Act.
Would an independent agent more accustomed to dealing with wealthier homeowners like Sen. Lott had made a difference in the coverage he received? And if Sen. Lott had the excess flood coverage he so obviously required, would he have launched his crusade to punish the industry he felt had wronged he and his fellow Mississippians? What do you think?
Meanwhile, as we reported Friday on our Web site, Sen. Lott's lawsuit against State Farm is still scheduled to go to trial this June. The Trial of the Century (even though it's been a short century thus far) would mean even more bad publicity for an industry already sporting a black eye.
There is still a chance the case will be settled, and State Farm--as well as the industry in general--would like nothing better than to make this go away. However, it would look awfully bad for Sen. Lott to back off just because his own case is settled, so don't expect any benefit for the industry overall should State Farm put this challenge behind them.
Would an independent agent have made a difference in how this scenario played out?
Comments (5)
This is the first I heard that Trent Lott had flood coverage, and that he has collected under it.
Puts a slightly different light on his argument, and shows that he is being quite two-faced about this whole thing.
First, it's a flood loss, so he can collect under his flood policy.
Then it's not a flood loss, so he can collect under his homeowners.
Kind of hypocritical if you ask me. How can he have it both ways?
If he knew he had exposure to flood loss, how can he justify buying full limits under his homeowners coverage, and much lower limits under flood coverage?
Surely, being the prudent and knowledgeable man he is, he at least inquired about higher limits for flood?
Or was he just trying to save a few bucks on the cheap and got burned?
Posted by Bill Lockhart | March 27, 2007 5:00 PM
Posted on March 27, 2007 17:00
I think going through a well-educated independent agent is the right answer for a person with a lot of assets. I believe there are not a lot of State Farm agents (or adjusters) that are well-enough educated.
The state of Missisippi has now come out with mandatory flood insurance training in order to keep your license. Maybe the state needs to make sure all the agents and adjusters know what they are selling.
Posted by Lynn | March 29, 2007 2:17 PM
Posted on March 29, 2007 14:17
I take exception to your example insinuating that a captive/exclusive agent is unable to identify and provide for the needs for Sen. Lott.
I think what you demonstrated was a difference in the ability of an agent to properly identify his client's needs.
Many captive agents have access to an internal brokerage department or outside source to fill their client's needs, as your example could have been handled.
I do not disagree with your assessment of high net-worth clients, and the special circumstances that can apply, but please do not confuse that with the ability of an agent--independent or exclusive--to ask the appropriate questions of their client.
Posted by Lee Cannon | April 3, 2007 1:13 PM
Posted on April 3, 2007 13:13
I take great offense and am personally offended by Mr. Ruquet's comment in his column: "Another thing I learned on that high-net-worth piece is that the direct writers are not particularly interested in the high-net-worth client."
Perhaps you came to this conclusion as the result of faulty information, or perhaps you are guilty of a having your conclusion in mind as you set out to gather facts to justify your position.
Whatever your motivation was for coming to this conclusion, to suggest direct writers are less concerned (versus independent agents) about our customers' financial well-being is ludicrious.
While I cannot speak for all direct writers, after 44-plus years with State Farm, I find Mr. Ruquet's comments personally offensive, insulting, and completely opposed to all my education, training, practice and experience.
In my opinion, sir, in addition to completing your own reality check, you owe all the direct writers a huge apology.
Posted by William Cashdollar, CPCU, CLU, ChFC | April 5, 2007 1:47 PM
Posted on April 5, 2007 13:47
I've been reading National Underwriter for a long time. I am a direct writer with Nationwide Insurance. This is my 24th year with Nationide. I have $15 million in premium volume, with almost half of that being personal lines premium.
I have 20 employees who attend at least one CIC class every year and sometimes two.
We had 1,200 Hurricane Katrina claims with no E&O claims to date. With this said, I wanted to address Mark Ruquet's column: "What if Sen. Lott Had Used An Independant Agent?"
I have the answer! Nothing would have happened! Nothing! Zero! Nada!
There have been virtually no independent companies willing to write coverage on our Gulf Coast for a long time. They have not participated, so that leaves the lowly direct writer to do the job that the independent agent cannot do.
I feel that Mark painted a broad group of agents unfairly. There are wonderful agents who are direct writers, and there are not so good agents who are independent agents, as Eliot Spitzer pointed out.
I also feel that the article was irresponsible and it will just motivate me and my fellow direct writers to do a better job.
Sam Responds: Mr. Spitzer targeted mega-brokers, not independent agents, who lack the leverage necessary to pull off the kind of bid-rigging and account-steering the brokers were accused of doing.
If Mark's column motivates you to do a better job as a direct writer, terrific! The consumer wins!
Posted by W. Doug Pyron | May 8, 2007 4:27 PM
Posted on May 8, 2007 16:27