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As many of you know, Ball Insurance specializes in helping local agents insure their local governments. Many times when a local agent will approach a board to advise that they want to bring a proposal from another carrier, they are also offering their agency as a servicing agency for that account. There is more being offered than just the insurance policy. They are offering their service, knowledge, dedication, expertise, partnership, commitment and experience.
Ultimately all involved know this is true, otherwise agents would be out of a job and municipalities would be buying their commercial package online. What is not pointed out that an agent or agency’s worth is not reflected the insurance proposal. It should considered. It is extremely important that the trust an entity is putting in their agent is well founded. If an agent unwittingly does not add a coverage, either property or worse yet an liability exposure, there will be no coverage at claim time. This is why even many experienced agents partner with Ball Insurance for municipalities. They willingly take a pay cut to make sure their municipal clients are covered accurately. It is also why we at Ball Insurance don’t write other policies, such as crop insurance. We know nothing about it! The fear is that we would inevitably miss something.
When the agent comes to offer a proposal, boards (and often even the agent) are confused into thinking this requires a bidding process. I would propose that Nebraska Statute Section 23-3109 indicates that bidding is not required for having insurance needs met. An entity is choosing more than a carrier or a commercial package. They are selecting an agent/agency who has prepared that proposal and who is recommending the coverages, terms, limits etc on it. It is assumed by the entity that the agent/agency will continue to keep abreast of any issues pertinent to entity, and advise if changes are necessary during the policy period.
The agent/entity relationship should not be “one and done.” For example, the agent is successful in getting the entity’s business and then they only see him/her at renewal time to sign some new documents the carrier is requiring. Worse yet, an entity never sees their agent again. They only receive an email annually from the agent or a customer service representative requesting they sign renewal documents.
It’s clear that the entity is obtaining a professional service. There are agents who are just better at servicing clients than others. It’s true that agents are paid by commission, which is different than many professionals, such as an attorney. Both are considered professionals by law in the State of Nebraska and are required to maintain professional standards.
If you need an attorney, you certainly don’t want the least expensive one. You want the best one. PERIOD. When there is so much at stake with a municipality’s commercial package coverage, doesn’t it make sense to have the best agent/agency? The one offering superior service, knowledge, dedication, expertise, partnership, commitment and experience?
The obvious answer is yes. A board has plenty to deal with. If there is an opportunity to have a professional look at coverages and give recommendations, take it. There is no obligation of move to another agency or carrier. It’s free professional advice. You just might find a good agent, premium savings and more coverages for your entity.
See below Nebraska Statutes Section 23-3109.
Competitive bidding; when not required; waiver of bidding requirements; when.
(1) Competitive bidding shall not be required (a) when purchasing unique or noncompetitive items, (b) when purchasing petroleum products, (c) when obtaining professional services or equipment maintenance, or (d) when the price has been established by one of the following: (i) The federal General Services Administration; (ii) the materiel division of the Department of Administrative Services; or (iii) a cooperative purchasing agreement by which supplies, equipment, or services are procured in accordance with a contract established by another governmental entity or group of governmental entities if the contract was established in accordance with the laws and regulations applicable to the establishing governmental entity or, if a group, the lead governmental entity.
Of course the answer is no. Often times its hard to tell, even for the agents. Here is some help to clear things up.
Here is OBGR First Fire Services Business Auto Coverage Policy Form.
C. Limit of Insurance
The most we will pay for “loss” in any one “accident” is the least of:
1. the cost of repairing the damaged property; or
2. the cost to repair or replace a part or parts of the damaged property as of the time of the “loss” with a part
or parts of like kind and quality without deduction for depreciation; or
3. the cost to replace the entire covered “auto” as of the time of “loss” with a comparable new “auto” manufactured to current specifications; or
4. the agreed amount limit that applies to the covered “auto”.
What does that mean? Items 1&2 refer to repairing/replacing parts. This is in the event of not a total loss. Items 3&4 tell you want they are going to do in the event of a total loss.
So who determines whether or not you are getting 1&2 or 3&4? Meaning who decides if a vehicle is totaled? In determining whether a vehicle is totaled, insurance companies will calculate the Total Loss Ratio (TLR) (cost of repairs/actual cash value) and then compare the resulting ratio/percentage to limits set and/or established by state law. In NE that is 75% of the retail value at the time it was damaged.
2009 Chevy Silverado fully insured for $38,000 has accident resulting in $15,000 of damage. The current retail value would be $19,500.
This vehicle would be totaled because 15,000/19,5000 = 76%.
That is over the state allowance in the TLR and the owner would be either received a new auto manufactured to current specifications or $38,000, the policy limit.
So if they insured it enough for replacement cost for a new 2016, they would get a new Silverado. Otherwise, they would get the limit on the policy.
Are all policies required to do that? No, if a policy form states that they are offering coverage that differs from the state law, they are not bound to follow the guideline.
Another policy example.
It begins in a very similar way to First Fire Services Business Auto Coverage Policy Form in relation to the repair vs. replace auto language. However, it adds something very significant that you want to pay attention to.
“In the event that the estimated costs to repair the covered “auto” exceeds 75% of the Designated Value limit shown in the schedule on the Declarations for that “auto”, you may choose not to accept payment under items 1.(a) or 1.(b) above. In that case, we will pay you the lesser of the amounts due under items 1.(c) or 1.(d) above. If you elect to neither repair nor replace the “auto”, we will pay you the actual cash value (ACV) of the “auto”, subject to 1.(d) above. If we settle the “loss” under items 1.(c) or 1.(d) above or pay actual cash value (ACV), we retain all rights to recovery and salvage.”
Whats the big deal, its stating the 75% ratio? Look closely, its not 75% of the ACV of the auto like the state guidelines its its 75% of the Designated Value limit shown in the schedule on the Declarations. That means, 75% of what your limit of the policy for that auto.
So lets take our example from above. Same circumstance, different policy.
2009 Silverado fully insured for $38,000 has accident resulting in $15,000 of damage. The current retail value would be $19,500. This vehicle would be repaired because $15,000 is only 39% of $38,000. Even though this is over the Nebraska state allowance in the TLR, a carrier is not required to replace if their policy tells you it won’t in its policy form.
In fact, this same 2009 Silverado can be repaired for for to $28,500 worth of repairs.
Here is that carrier’s instruction when they made this change Designated Value Change in their Business Auto Coverage Policy Form 2010.
“The biggest factors to consider are how much premium you want to pay and what you would likely want to get, if your vehicle is damaged beyond repair. However, keep in mind that in the majority of vehicle physical damage losses, the vehicle can be repaired.
If you want to replace the vehicle with a little newer vehicle in possibly better condition, then the Designated Value should be set close to the cost of the newer vehicle you might want.
If you want a brand new vehicle, the Designated Value should be set at the high end of the range. Remember, the policy only allows you to get another vehicle, if the cost to repair the vehicle exceeds 75% of the Designated Value. If you decide to select a high Designated Value, we can provide extensive repairs even on an older vehicle with a relatively low actual cash value, before we are obligated to get you a different vehicle. Also remember, the higher the Designated Value, the more you will pay in insurance premiums.”
If they tell you they aren’t giving you a new auto, believe them. It’s important to understand these differences before you have a loss. You need information to make educated choices. There is nothing worse than going into a claims situation and not having it handled the way you expected.
What Ball Insurance is offering in Nebraska is Agreed Amount Valuation. Our Physical Damage coverage is simply better.
I recently read an article from Fire Management Today, showing how the volunteer firefighters of Floyd County, IA fire dept. adopted a totaled fire truck. Due to limited budget funds available, volunteer fire depts. are always looking for ways to meet the needs of the community they are charged with protecting, in the most economical way possible. Most have equipped Forestry trucks, and have keep their existing fleet in tip-top shape to extend their service life. This article speaks of rehabbing a totaled vehicle and putting it into service.
Photo: Courtesy of Benjamin Chatfield, Fire Chief, Floyd Community Volunteer Fire Department.
The truck pictured above was originally valued at $300,000. It was totaled by the insurance carrier because the repairs for estimated to be around $125,000. The South Carolina fire department who experienced the loss received a new fire truck, due to the fact that they had it insured for physical damage. Their carrier totaled it since the repairs were so significant. The costs for repair were 41% of the value of the vehicle.
The two most recognized specialty fire/EMS policies offered in the state of Nebraska, allow the carrier to repair a vehicle for up to 75% of the scheduled value for repairs. Meaning the Fire Truck above could have sustained $225,000 worth of damage, that’s $100,000 MORE DAMAGE, and these carriers would have REPAIRED it, instead of totaling it.
Up until 2010, the policy we, at Ball Insurance, sold had replacement cost coverage. The carrier changed that to designated value in 2010, adding the 75% repair clause. We encouraged all our insureds and agents to LOWER THE VALUES ON THE TRUCKS. The reason is that the investment the department was making on premium was not equal to the benefit received.
Translation: Departments expected a new fire truck when it was significantly damaged, and the carrier was no longer going to offer that.
The policy Ball Insurance now offers, OBGR’s First Fire Services, does not have the right to repair your fire truck for up to 75% of value, or 50% or 40%. In fact, there is no percentage allowance for the carrier. If your auto’s repairs + the cost of salvage are more than ACTUAL CASH VALUE of the existing auto, its totaled. The scheduled value of that auto is whatever your department wants. It can be a replacement cost value even on older autos. We know fire departments take good care their autos. You chose how you wish to cover your fleet. That way there are no surprises at claim time.
Photo: Andrea Pendergast, Charles City Press.
Kudos to all volunteer fire depts. who do take on big projects this one. I’ve visited with several of them here in Nebraska. They don’t do it because they have lots of time on their hands. They do it to stretch the budgeting dollar. They have not only responded to the call to serve their community, and are talented and ingenious enough to meet the needs of that community in highly skilled ways.
My goal is that these efforts are not required for the vehicle insured on my policies. Let another fire department buy my clients totaled trucks. My clients expect that the premium they pay for their auto policy will result in a new truck should they total theirs.
Call us today to see how you can receive this superior coverage.