Insurance can be confusing, and there's a lot of inaccurate information online, but that's where Specialty Insurance Agency (SIA) can help. In this blog, we'll be diving into common misconceptions not only about our business but also insurance in general. The good, the bad, and the ugly.
SIA is a large insurance company: FALSE.
You can think of SIA as more of a retail shop on Main Street than a big insurance conglomerate. We're a Minnesota-based small business that's also family-, woman-, and veteran-owned, and over half of our 10-person team is made up of artists. As a family-owned, family-run business, we value supporting artists and small business owners because we are also both!
Just like that retail shop on Main Street, we sell items (in our case, insurance products), but we don't create them ourselves. We are not the carrier/insurer. Instead, we've established relationships with a variety of insurance carriers, and we sell their products. This is why insurance agencies are often called the "retailer" in this market.
The insurance carriers (also called insurers) will set policy terms and rates, and they're also the ones making decisions about claims. A lot of our job at SIA is customer service and advocating for our insureds to the carriers we're working with.
The large insurance company we're often mistaken for is the insurance carrier; the carriers we work with are multi-million- or multi-billion-dollar companies, and this is good! If you have a large claim, you want a company that's large enough to pay said claim.
Some insurance carriers work directly with insureds (you've probably seen or heard their ads), but many will not and will require working with an insurance agency to access their coverage.
SIA sets its own premium amounts: FALSE.
The carrier/insurer sets the premiums, not SIA. As we mentioned above, you can think of SIA as more of a retail shop on Main Street. Like a retail shop on Main Street stocks different brands of items, SIA works with different carriers to create insurance products for our clients. Check out this blog for more info!
Having a high loss ratio means claims won't be paid out: FALSE.
The carrier of our performer and vendor programs is a multi-billion-dollar company. If they're offering coverage to our clients, they're able to pay out a legitimate claim for something our policy covers, regardless of the loss ratio of the policy/program.
A loss ratio is a way to measure how much an insurance company pays out in claims compared to how much it earns in premiums. This helps insurers measure profitability. A high loss ratio means the company is paying out more in claims and expenses than it's earning in premiums, whereas a low loss ratio means there are fewer claims to pay out compared to the premiums they're collecting. High loss ratios can result in things such as premium increases, coverage availability, reduced coverage limits, and exclusions/guidelines. While a high loss ratio may result in a policy being non-renewed, it doesn't affect claims payouts.
SIA raises premiums for its own benefit: FALSE.
Insurance carriers raise premiums, not insurance agencies. As we've established, SIA is an agency, and not the actual insurer. Additionally, with over half of our team being artists themselves, we see directly how premium increases negatively impact the artists and small businesses we insure.
Agencies make money by earning commissions on premiums. Furthermore, agencies are allowed to charge a fee when servicing a policy. These fees (sometimes called policy fees or agency fees) are separate from premiums, and the amount an agency can charge is set by state law.
SIA doesn't currently charge an agency fee or policy fee on our performer and vendor policies. Since we write enough premiums through those programs to cover our costs, pay our employees a living wage, and provide benefits, we haven't needed to increase the cost of coverage on those programs by charging a fee. We do charge a fee on our MPEP policies, but that's because those policies require a lot more work to issue, and that program is smaller, meaning less revenue is generated for our agency. We have to charge a fee on those policies to afford continuing to service those insureds.
The only things affecting premium increases are the number of claims filed and the policies SIA has sold: FALSE.
One major impact on premiums increasing comes from outside our market. Extreme weather and natural disasters across the country have created a spike in homeowners, renters, auto, and other insurance claims. Due to the increases in those areas, carriers/insurers will look to regroup their losses from other markets (such as Commercial General Liability, like the policies we sell). Additionally, the increasingly litigious nature of the U.S. makes people sue for any reason. They might not win in court, but the defense costs can be quite substantial.
As we've learned over the past few years, as insurance companies see their profits disappear, they end up raising rates across the board. Check out this blog for more info.
SIA hasn't been selling enough $3M/$5M individual performer policies, so they're making clients recoup losses: FALSE.
We'll be frank: the performer insurance carrier doesn't want to write $3M/$5M policies at all. Why? You know all those billboards from lawyers promising to "go after insurance companies"? They'll go for the maximum amount you're insured for, and while they likely won't get it, it still causes lawsuits to drag on for years. This, in turn, causes defense costs to go through the roof.
We had to fight to even keep the $3M/$5M coverage available, knowing that we have performers who routinely work at places requiring the higher limits. If we can't offer those limits, then performers won't be able to meet the venue's insurance requirements. We don't offer the $3M/$5M performer policies to make the business money, but rather to fill a need for our clients.
Again, premium increases come from the carrier. We just sell the products. We never push extra coverage on our clients just to make another dollar, either. We do, however, recognize the financial strain of the recent premium increase on the $3M/$5M coverage for performers, and are doing everything we can to find a solution.
If you have any questions about what's covered in this blog, please reach out to our office. We also welcome and encourage you to email a topic you'd like covered to info@specialtyinsuranceagency.com. Be sure to check back in periodically to read about newly added topics!
