TWFG Commercial Business School – Commercial 101 1 Commercial 101

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Commercial 101

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TWFG Commercial Business SchoolCommercial 101

Commercial 101 – 104Commercial 101

Overview

Commercial Insurance Basic TermsCommercial Insurance Polices: OverviewImportant Auxiliary CoveragesACORD Forms OverviewCommercial Lines Workflow ProcessSubmission ChecklistPost-Binding Checklist

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How Does the Underwriting Process Operate?Commercial Insurance Policy Coverages: First Level DetailSilverplume Overview (Live Demo)Comparative Rater Overview (Live Demo)

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Commercial Lines Basics Property: COPECommercial Lines Basics Property: BuildingCommercial Lines Basics Property: Business Personal Property (BPP)Commercial General Liability (CGL)Module 3 Case Study

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Commercial AutoMulti-Line Policy TypesWorkers Compensation OverviewEndorsements Common to Most Policies

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Industry Segment Classes

Retail & Service Farm/RanchArtisan Contractor Excess & SurplusCommercial Auto Professional LiabilityWorkers Compensation UmbrellaCommercial Real Estate BondsRestaurant Financial InstitutionsManufacturing Hotels/MotelsAgriculture Medical Technology

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Agenda

Overview Basic TermsPolicies OverviewACORD Forms OverviewPost Binding ChecklistSubmission ChecklistWork Flow ProcessesQuiz

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Learning Objectives

1. Understand how soliciting/quoting/binding/servicing CL differs from PL

2. Understanding of basic Commercial Lines terms3. Understanding of types of CL policies and what they

cover4. Awareness of important cross-sell coverages and policy

types5. Ability to complete basic ACORD form6. Understanding what makes up a complete submission,

and post-binding requirements

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1. How does Commercial Lines differ from Personal Lines?

Degree of complexityGreater E &O exposureNecessity of being well trainedNecessity of starting out smallAdmitted vs. Non-Admitted

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2. How does the selling process differ?

Necessity of having credibilityKnowing enough about a specific class to properly recommend coverageCommitment to continually updating your knowledge and skill levelNecessity of being well prepared when presenting the quote

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2 (continued). How does the selling process differ?

Necessity of having a formal marketing planExtremely low win rate for quoting walk-insYour competition is well organizedProper servicing and regular contact necessary for

retentionThis is a very competitive field

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3. How does the underwriting process differ?

Greater number of exposures to evaluateIncreases complexity of each exposureGreater financial risksImportance of providing complete and accurate informationAll underscore the importance of being qualified and knowledgeable

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Commercial Insurance Basic Terms

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Before delving too far into the realm of Commercial Insurance, it’s a good idea to discuss some

important terms.

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Insured:

Person/entity that is named in the insurance policy. Usually the buyer.

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Insurance Contract:

Insurance policies are contracts. With only a few exceptions, insurance contracts are two party contracts. The two parties are the insured and the insurer. Although third parties (those who file claims against the insured) may benefit from the insurance contract, the insurer’s primary duty is the insured. The insurer either acts on behalf of the insured in situation where the insured would be legally liable for damages, or pays the insured directly for damage to the insured’s property.

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TWFG Commercial Business School

Commercial 101

Liability:

This term appears often in the titles of different types of commercial insurance. It refers to acts for which the insured is held legally liable. These acts are what “trigger” coverage under many policies. Most liability insurance contracts today are open peril, meaning that all causes of loss are covered except those specifically excluded. So, if the insured does something that causes harm or damage to other, and that “something” is not an excluded act, then the insurance policy will respond.

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First Party Coverage :

This refers to coverage for things that the insured owns. When these are damaged, the insurer pays the insured (first party) directly. Typical examples are building and business personal property.

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Commercial 101

Third Party Coverage:

This refers to liability claims. The third party is the individual/entity that is damaged due to the insured’s acts. They are also known as the “claimant”, as they bring a claim against the insured. Note that the third party is not a party to the insurance contract, but does benefit.

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Who is the Second Party?

The insurer is the second party. So, the insurance contract is a two party contract between the insured (first party) and the insurer (second party). When there are liability claims, a claimant (third party) may be paid for damages.

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Property & Casualty (P&C)

Property and Casualty Insurance (P&C) refers to the primary exposures covered by the most common commercial insurance policies. Property refers to physical property such as building and contents or auto physical damage. Casualty refers to liability, such as auto liability or commercial general liability.

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Exposure

An exposure is something or someone that is subject to a loss, such as a person, a building or a product. It is also commonly used to refer to the overall or specific characteristics of a risk that are evaluated by underwriting. For example, the Auto exposures or General Liability exposures. In this context, a specific exposure to be evaluated for a restaurant would be the cooking exposures.

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Commercial Insurance Policies Overview

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There are a number of common policy types for commercial insurance. Following is a list with some basic description of what each policy covers.

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Commercial General Liability (CGL)

As the name indicates, this policy provides coverage for acts committed by the insured for which it is held legally liable. Coverage applies to Bodily Injury and Property damage suffered by a third party. Injury stems from either the insured’s premises, products, or business operations. Exposures are typically grouped as follows:

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Premises

Injury to others while they are on the insured’s premises. For example, someone slips and falls at a place of business.

Operations

Damage or injury to others while work is in progress off the insured’s premises. For example, a contractor severs a water line while digging to install a fence post.

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Commercial 101

Products

Damage or injury caused by the insured’s product. For example, a consumer is injured when a chain comes loose from a chain saw.

Completed Operation

Damage or injury to others caused by the insured’s completed work off premises. For example, three weeks after a plumber completes repairs at a residence, the glue on the repaired pipe fails, causing a leak which damages carpet and sheetrock.

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Commercial Property PolicyThese policies provide coverage for the insured’s owned building and/or business personal property such as furniture, supplies, fixtures and inventory.

Business Auto PolicyThis policy provides liability coverage for the insured’s autos. It may also provide physical damage coverage to the insured’s autos (a form of first party coverage)

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Inland Marine

This is a form of property coverage used for specifically valuable items or for items that do not stay at the insured’s premises. The most common example is mobile equipment such as bulldozers or tractors owned by a contractor.

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Workers Compensation and Employers Liability

Often just referred to as Workers Compensation coverage, this type of policy provides no-fault coverage for injuries to employees. In other words, if an employee gets injured on the job, he/she does not have to prove that the employer was negligent or at fault. Workers Compensation pays regardless of fault. It is mandatory in most states. The policy also provides coverage to the employer for non-workers compensation claims that an employee might file against the employer.

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Professional Liability

Protects traditional professionals (such as physicians) and quasi-professional (such as real estate brokers) from errors and omissions associated with their professional services. There is a distinction here between economic loss vs. bodily injury and property damamge.

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Important Other Coverages/Polices

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Workers Compensation

Provides a sole remedy for injured workersIncludes employer’s liability for injuries not covered by worker’s compLosses associated with these coverages are excluded under all other CL formsOver 73% of claims facing companies today are from their own employeesGoing “bare” exposes an employer to a swift and costly end

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Cyber Liability

High incidences of identity theft and network hacking

Costly regulatory compliance exposuresAny business that handles customer data or has a large employee base is exposedMultiples levels of coverage availableMinimum premiums starting at $500Some carriers BOP products can endorse this coverage

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Employment Practices Liability Insurance (EPLI)

Exposures not covered by GL or WC formsLosses resulting from wrongful employment practices:– Discrimination, sexual harassment, retaliation, wrongful

terminationHigh dollar claims are commonOver 73% of claims facing companies today are from their own employeesGoing “bare” exposes an employer to a swift and costly endMost BOP products can add this coverage at a nominal charge

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Fiduciary Liability

Errors and omissions coverage regarding the administration of company sponsored retirement savings plans, health plans, pensions, etc.

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Commercial Umbrella

Provides excess liability over underlying policiesProvides broader coverages than underlying policiesProvides primary liability where not covered by underlying policies

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ACORD Forms Overview

Common elements

Full entity name & mailing addressBusiness phone numberType of entityNature of businessYears in businessLoss Payees/ Mortgagees/Additional InsuredsGeneral informationPrior insurance informationLoss history

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Submissions ChecklistAll Submissions

Completed ACORD forms for each line3 year hard copy loss runsCompleted required supplemental applications

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Property Specific

Date of construction for each buildingUpdates for buildings over 20 years oldConstruction typeSquare footage per buildingList of occupants for LROBurglar & fire alarmsReplacement cost

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GL Specific

Description of operations

Payroll/Sales for each classificationAnswer all underwriting questionsList of Additional Insureds, including relationshipSpecial coverage requests

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Auto Specific

Lists of drivers, including DOBs & DLsAnswer all underwriting questionsYear/Make/Model & VIN per vehicleCost new per unit if availableGaraging address/use/=radius per unitLoss Payees/Lessors per unit if applicable

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Workers Compensation Specific

List of class codes/payroll/number of employeesList of all locationsInclude Experience Mod worksheetFEIN and NCCI number if Mod worksheet is not providedAnswer all underwriting questions

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Inland Marine Specific

Schedule items over $2500Lump all items under $2500 to “Unscheduled Equipment”

Loose Tools – Indicate max value per item, Usually $250. List sum as separate entry under “Unscheduled Items”

Provide type/description/serial #/model/manufacturer/model year per item – becomes important in the event of a claim

Most Contractors’ Equipment is insured at ACV- advise insured

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Inland Marine Specific Continued

Rented/Leased Equipment

Total rent/lease receipts for last 12 months

Value of highest value item expected to lease in next 12 months

Total value of rented/leased equipment for next 12 months

Average value of rented/leased equipment at any one time

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Inland Marine Specific

Equipment Security

Equipment in locked building

Equipment fenced

Equipment in locked and lighted yard

Etc

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Post Binding Checklist

Signed ACORD applications3 years prior loss runsSigned UM/UIM rejections – AutoSigned Officers/Owners Exclusion – WCComplete any “Subject To” items

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QUIZ

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1. Why is it Important to Fully Complete an ACORD Form?

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1. Why is it Important to Fully Complete an ACORD Form?

Answer:To avoid delays in getting a quote.

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2. What is the difference between first party and third party coverage? Give an example of each.

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2. What is the difference between first party and third party coverage? Give an example of each.

Answer:First party coverage applies to the insured. Example: Comprehensive coverage on an auto.

Third party coverage benefits someone other than the insured, for acts committed by the insured. Example: Auto liability, which pays the other party.

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3. Name 3 types of commercial insurance policies.

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3. Name 3 types of commercial insurance polices.

Answer: Commercial General liability (CGL), Commercial Property, Business Auto, Inland Marine, Workers Compensation, Professional Liability

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4. Define Completed Operations as it relates to the CGL. Give an example of a Completed Operations exposure.

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4. Define Completed Operations as it relates to the CGL. Give an example of a Completed Operations exposure.

Answer:Completed operations relates to completed work done by the insured away from his/her premises. Example: Plumbing work done by a contactor at a residence. Once work is complete and the contractor leaves, any resulting loss from work performed would be a completed operations loss.

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Future Classes

February 7th Commercial 102February 14th Commercial 103February 21st Commercial 104

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Industry Segment Classes

Retail & Service Farm/RanchArtisan Contractor Excess & SurplusCommercial Auto Professional LiabilityWorkers Compensation UmbrellaCommercial Real Estate BondsRestaurant Financial InstitutionsManufacturing Hotels/MotelsAgriculture Medical Technology

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Questions???

Documents

TWFG Commercial Business School – Commercial 101 1 Commercial 101