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How to prepare for you next insurance renewal

Tyler Adams, Published on February 18, 2020

Transcript:

– Welcome to our Security Observer webinar series. Each month, we promise to provide you with trends and tips that will help position you as the most trusted company when it comes to the transfer of money and issues of cyber security. I’m Tom, this is Tyler.

– Thanks for joining. Last month, we reviewed top trends and tips to protect you, your company, and customers from fraud. If you were not able to attend, that webinar is available on certifid.com, on the resources page. I encourage you to go check it out. We had some great feedback, in regard to our new series, and how we are having a little bit more fun, flying a little bit more off the cuff, and inviting you all to participate, and encouraging you to earn some free swag. So stay engaged, challenge us-

– A lot of great stuff.

– And we’ll be sending you some stuff in the mail.

– All right, what are we talking about today? So, we’re committed that this year from a theme was protect and prosper many different topics. Today we’re gonna take on the issue of preparing for your next insurance renewal. We’re gonna do a deep dive into some of the topics that we feel are most important as you approach that. Including the types of insurance that are out there. Speaking more to the title industry. So, if you’re a title agent, you’re a law firm, if you’re any type of organization that handles real estate transactions, this is strictly intended for you. So we’re gonna talk about types of insurance. This whole idea of coverage limits and sub-limits that are creeping up now. Current trends, we touched a little bit last month, we’re gonna talk about that a little bit deeper. The five questions that you should ask your agent, or your carrier, to make sure you do have the coverage, and then we teased it out last month, but we’re gonna get into it. How CertifID can actually help increase wire fraud protection on your E&O or cyber policy.

– We’re gonna try to make insurance as fun as it can be-

– Yes, I know

– For twenty minutes or so.

– It’s so horrible. All right, so before we get started.

– Yeah, yeah

– For those of you that don’t know CertifID protects is the transfer of money both in and out of the escrow account. Doing so our goal is to lower the risk of wire fraud and social engineering on every deal. We stand behind what I just mentioned, our product comes with a one million dollar per wire guarantee.

– And we’re also excited to announce that we are now integrated with ResWare, RamQuest, and SoftPro select. So, uh, you know, now more than ever we’re giving your team the ability to run CertifID as smoothly and efficiently as possible in your operation.

– Yeah, one hundred percent, if you’re not using CertifID and you want to be a company that provides the highest level of protection for money transfers. We’re ready to connect. If you are a current customer, we’re rolling out some really cool stuff that you’ll continue to hear about in the coming weeks and months.

– So, before we dig in on our topic today. We want to first give you a second to kind of introduce yourselves. So, obviously Tom is the co-founder and CEO here at CertifID. But for those of you who don’t know, he is also a large title agency owner here in the state of Michigan. And I think that is really important as we talk about this topic, and kind of let everyone know that you’re going through this not only from a CertifID perspective, but actually as a title agency owner.

– No, that’s exactly right. So, um, attorney by trade turned large agency owner we founded Sun title back in 2005 so Lawrence, my partner and I, got into the space, and we have obviously learned a lot, like many of us, um, that have started this journey into title and settlement, but this issue of insurance we really wanted to refresh this conversation, just from what we learned from last summer in our renewal. So, we’ll be speaking in segments around CertifID, and I will have more in my title agency owner attorney add-on in the interest of full disclosure, I am not a licensed producer for professional lines or other coverage. So, this is strictly educational content for you. If that makes sense.

– Cool

– So let’s dig in

– Let’s do it. So, what were the most common types of coverage for a title agent?

– Yeah, apart from, like, the slip and fall, you know, your general liability stuff. We want to get into the blocking and tackling of the risk of the work, and, um, our networks. So, the three main forms of insurance center around errors and omissisons, we call E&O in the industry, otherwise known as professional liability. Fidelity insurance, like fidelity bonds, security bonds, some states require them some don’t, and then cyber. So, we have E&O, fidelity, and cyber, are the main three segments of insurance that are the most prevalent.

– And are all of those required, or how do you think about them?

– No, that’s a good question. So, E&O is required across the country to get an underwriter to actually sign an agency to do business on their paper, to be able to bind the underwriter for title insurance. So, E&O across the country is required. Some states and other underwriters in certain markets require fidelity, and require crime policies.

– Got it.

– So, I would say E&O required, fidelity usually state by state or market driven. Cyber has been optional, I think that could change in the future, but right now cyber’s been optional.

– Got it. All right. So insurance limits are often set by the company, and this is an important consideration for each title agent.

– Why don’t you share a bit about, what you think about, as far as, your insurance limits as an agency owner?

– Yeah, I think the starting point as you’re approaching your renewal or this conversation is, what is my risk? And the way we thought about this, and think about it every year, is what’s our transaction profile, and had that changed year over year? So am I taking on more commercial? Am I doing more construction? Where I’m holding, you know, escrowed funds for monthly draws. Is there something about the way I’m doing the work, or the type of work, that has changed? ‘Cause that’s got to bubble up, and I think from there you have to look at, okay, what is my actual risk? If I had a total title failure or I had a total escrow failure, what’s that average cost where- ’cause everyone knows if you’ve been through a claim, the underwriter codes it as agent error, and then we’ve gotta foot the bill to either defend against it or approach our E&O carrier for coverage, and I think that’s the most important consideration because, the risk is if you don’t have that proper analysis and you’re under insured or over insured you’re not hitting that sweet spot of just what’s adequate coverage.

– Yeah, and I would imagine too I mean some of this is about the risk that you see in your own region in your own market at your own agency but then there’s also some risk that are market wide that everyone has to look at. And from the insurance carriers they’re also looking at it as well.

– Yeah, totally. In the sense that many of us would have multi- tens of millions of dollar commercial deals or if you’re in a affluent residential district what’s the likelihood that you’re gonna have a forty million dollar claim on a commercial. You may have one segment that could relate to the value in easement or write away or something like that, but not necessarily the whole thing.

– Cool. So, let’s dig a step further. How do per claim in annual aggregates work together?

– Yeah, so just know that most policies are segmented, the coverage into a per claim and then what’s the overall ceiling of the policy. Most policies are like a one million, one million, which meaning you have one million per claim and you have one million in the aggregate. So, if I had four claims at two hundred and fifty thousand a piece and I hit my million dollar aggregate that fifth claim what ever that value is, would not be covered because you meet your aggregate. So a lot of times, you know I would recommend at least a one million dollar per claim and then, you know, we’re typically a one two or a one three, where we have a little more ceiling on the overall aggregate, should some, you know, more than one claim come up in a brutale cycler in a twelve month period.

– Makes sense.

– Yep. So, as we know with insurance the devil lies in the details, and sub-limits and conditions precedent. So, can you explain how sub-limits work in relation with the overall insurance policy?

– Yeah, the old adages in insurance is the bold print giveth and the fine print taketh away. Right, so there’s a lot of fine print these days that have been takenth away.

– That’s why we both wore our glasses today, so we could help read the fine print.

– Alright so, sub-limits, this is an area guys that if you haven’t had a review or look specifically at the sub-limits or the actual policy, you have too. So what we’re seeing in the landscape is that insurance carriers are looking at some of these micro-risk packets that there saying, “Look I’ll write a million, two million of E&O for you, but I need to sub-limit down, some of these specific risk categories that we’re taking too high of loses on.” Right so, you can have two million dollar aggregate, but you can have sub-limits as low a fifty thousand for specific risk claims that you may think you may have a million in coverage for, but you have something a lot less.

– Got it. Got it. So how about conditions to coverage, what should the title agent know about these and how they affect their ability to trigger coverage in the event of a loss or claim.

– Yeah so again, the construct of the insurance policy, if you’ve ever read one, there a grity read, great for sleep aids, buts its basically, what is an insurable event? Right. What are exclusion and what are those conditions that trigger coverage? So specifically, to answer your question, we’re seeing additional conditions in some of these areas especially some of these areas that are sub-limited. That the title agent has to be able, or the insured, has to be able to prove they did things to trigger the coverage or it could be an automatic denial.

– Can you provide a specific example of something like that?

– Yeah, there are many, one of the most current and what I’d say alarming, we’ll get into this in a little bit, is this issue of electronic funds transfer or what the industry is calling Wired Fraud Coverage. So, we’ve seen a two step approach over the last twenty-four months, where sub-limits have been added and those sub-limits continue to go down each year. So, if you had a million in coverage three years ago, it’s probably two-fifty or a hundred thousand in your renewal and then their strapping on more conditions precedent, saying, “Hey, not only do you have to do call backs, but you have to do call backs and document them a certain way or in a certain sequence or there’s denial of coverage.” And we’ve had many cases that the title agent thinking they were following that weren’t really understanding what that kind of waterfall of steps looks like and then we’re denied coverage.

– So meaning that, they essentially filed the claim, then they went back, the insurance carrier said, “Hey, prove that you did these things.” And they thought they were doing it appropriately and in fact weren’t.

– Literally, you not only have to check the box, but be able to document how that boxed was checked.

– Wow. Okay.

– Big Trend.

– All right, so isn’t true that the insurance landscape is rapidly responding to these trends?

– Yeah, we touched on this a little last month and that trend line similar to what I just mentioned in Wire Fraud is that from what we’ve learned the insurance community likes the title space. They understand settlements. They understand what we do from a professional liability stand point, like what’s the blocking and tackling, the forty year search, the commitment, the clearance, the settlement statement prep, the delivery, the escrow, the disbursement, and then the final policy issue, that continuum, they understand.

– And I mean, that industry as a whole claims a relative low title insurance from an underwriter perspective, its a good business.

– Yeah, no, it has been a really good business and that and unless the underwriter has a problem, we don’t have problem on E&O because we don’t have to trigger our E&O policy for agent error or something like that.

– You learned something a little differently when you went to go renew though.

– Yeah, what we did during our renewal is we learned that as far as the E&O, so we have E&O and cyber and we have fidelity, but lets say E&O and cyber, E&O carriers are saying, “Look I understand what you do and I want to insure that you do what you do properly,” but as anything related to cyber or social engineering or wire fraud, we don’t that want part if the business, we want you to take that on on a cyber side.

– Decoupling themselves, distancing themselves from that.

– That’s a good way to say it is yeah their kind of bifurcating these worlds and we haven’t claims and our rates, you know, just kind of continue to tick up because its a pool of models. So other people that aren’t doing the best practices, we that are, are kind of back filling that.

– So, then how do you think about that like on the cyber insurance side and how do actual decouple your business to say well cyber is over here and our business is over here when everybody today is a digital business to some regards?

– Yeah, well some of the irony that I find and I’m talking to myself as I am addressing the group here, while we know a lot about insurance and title insurance and all that. There’s been such movement in the E&O and cyber space, that I think the biggest thing you can do is align yourself with somebody that really understands both worlds.

– Sure.

– And the interaction, we get in this in a little bit more detail, but I think that the best thing you can do is be honest with, who you working with, are they an expert in E&O, do they have capability in cyber, and how do those worlds kind of meet because the interesting thing about E&O, there’s only a few kind of standard template policies. For cyber, there’s over seventy policies floating around. It’s literally the Wild West, where this whole threat came on,

– Insurance happening fast, so much faster.

– Exactly.

– It makes sense. All right, so as an agent, if you had an upcoming renewal, what questions should you be asking to prepare yourself?

– These are not exclusive, but a few come to mind. I think the first thing is just again taking that minute to take a step back, how am I doing my business, what business am I doing, and does my E&O cover the work that I’m actual preforming. So when we interact our agent, we put very plain English emails together to say, hey you know, this is the type work, am I covered for this. Use some of those examples that you might have questions for and make sure that you get, in writing, documentation back , if its something special you can always provide an Endorsement on your policy that could cover those niche little angles. Country wide, the way that we preform title and settlements is different, the end product, transferring marketable titles from seller to buyer, is the same but you need to know specifically am I covered for blank? Secondly, does the policy stack cover all the services and offerings that I’m providing. It’s a little deeper analysis of what I just mentioned to say okay the work I’m doing, but how am I doing it? Do I have any other services or bolt ups that I’ve provided my customer, do I just do straight escrow? Do I do courtesy closings, where I don’t have a file. I mean there are examples where, should I send one of my notaries out just because the law firm needs someone there. I mean all those things unfortunately are just risk profiles.

– Does that go back a little bit to what you mentioned before about thinking your doing things appropriately and then going to get a claim and then them saying no, this is being denied, get that documented before you go in?

– Yeah, because they could argue you didn’t have a direct relationship with this customer, they didn’t pay you, you signed at the nursing home or right before the surgery of somebody. Then there’s the questions of mental capacity or what ever happens. I’m just using this as an example but that’s exactly right.

– Sure.

– Be honest, in the scope of things, what are you doing. The next, would be the new and emerging threats wire fraud, ransomware, theft of data, compliance with all the state laws and regulations around data privacy and information security. Do I have adequate coverage if? If one of those triggering events happens. The next, deals with are my per claim and aggregate limits actually adequate for what I’m doing. Maybe think about those unforeseen circumstances in what would happen. The other is we have a lot of large clients and people that grow through acquisition or have affiliated businesses. Just think about the whole tapestry companies that are operating under your umbrella or that you maybe sourcing resources to you and the issue, do I have all the enterprises covered? Do I have predecessor or current liability that I’m inheriting through some of the movements in market

– All right so last month we mentioned to you, kind of teased out a little bit, that we’ve been working on something that would help you get more coverage, if you were a certifID customer and we wanted to elaborate more. We believe here at CertifID that not all title companies are made equal and that the ones that do the work and put the processes in place and adopt new technologies to help prevent them from fraud, should be rewarded and we did a lot of work to not only help prove that out, but to actually work with the insurance company or insurance industry to help bring light on that and that same as if you had a home and you put a smoke detector in, you are more likely to get better policy and coverage there, than if you don’t. We really wanted to make it feel and help our customer get rewarded for really being being best in breed.

– Yeah, so to that end, all good points Tyler, we got to work on this issue of think of it the global insurance market looking at title and settlement, especially around the area wire fraud and essentially them wanting them to leave a burning building saying, “Look I get what you do on the professional side, but this wired fraud issue, we’re just taking to many claims, to much to them to the exposure, and we’re going to sub-limit or just stop endorsing that coverage policy together. So, happy to say that us along with several partners around the country, that we worked with that are just so skilled in professional lines coverage, were able to convince Lloyd’s that it’s still a good idea. There’s a way to manage and mitigate this risk. The industry needs protection for those unforeseen events. Now for CertifID customers, we have a new program they call it the CertifID Endorsement where you’ll be able to double the scope of your coverage. So, you’ll be covering in-bond and out-bond on an E&O endorsement and doubling the, what I understand, are most available limits are two fifty, two hundred fifty thousand per wire. They’re going to rachet those up to five hundred thousand.

– And I mean this is huge, right, like they were looking at this as a distressed asset in a lot of ways and concerned around how they can manage it. You did a lot of work on this front too get in front of them and say, “Hey, title companies are really trying and need covered in order for us to be able to do business.”` I love the analogy you sometimes use, on an out going, you don’t know when you can get hit with a fraud. You don’t get to pick, its not like you get to purchase a vehicle and you know how much it is and if you were to total it, you know what you could lose. In wire fraud, it could be a five thousand dollar earnest deposit or it could be a five million dollar wire.

– Yeah, that’s exactly true. So, we did at our renewal this is where this kind of fire in us lit last summer. To say, “Okay this is not sustainable, our title agency needs more coverage in this area, so we’re going to get to work.” That’s exactly what we do. We’re proud not only of our team, our partners, also this offering for the industry ’cause it does signal that we do have value and what we do matters, but we do also need that extra layer of protection.

– Totally

– Yep

– Cool, well if you want to learn more about how to take advantage of this additional policy, you are free to email us at sales@CertifID.com and we will walk you into the details.

– Love to talk to you about it, it’s super cool.

– Awesome, so we’ve had a couple questions come in that we would like to address here, as we finish up today’s webinar. First one is how can I best avoid an increase in my policy premium?

– Don’t have claims. Guys, you have to understand that underwriters are human beings and underwriters understand stories and you have to be your own advocate to prove what you’ve done. If you’re ALTA best practice compliant and you have a third party attestation for that compliance. If you have a well defined process that walks through, I mean look at the cover-able areas and show them how every step of you workflow is mitigating risk, right. If you run a forty year search, do you have a quality control before that’s released in the form of a commitment? Do you have dual-authentication around setting up and releasing a wire? Do you have daily reconciliation around you escrow account? Do you have adequate insurance and have you had that without claims? so don’t just fill out the standard app that hasn’t changed in thirty years, go off script, record a video, I always say see attached A, I paint a picture every time we do a renewal. This is what we’re doing, this is why it matters, if you can get right to the underwriter and have an honest conversation with them about why you’re different. That’s the thing that matters. If you’re working with a carrier that doesn’t what to hear, then you need to switch carriers, honestly. They need to be able to the time to get know you because, just like all title agents aren’t created equal not all E&O carriers and agents are willing to roll up their sleeves, do the work and say, “Look I’ve got this class of people and then I have this brand and this brand is one that we should get on a preferred pricing schedule for.

– Well said. Next question, what the best thing I can do to make sure my coverage isn’t denied?

– This is an onion that has a lot of layers. The first question you have to ask is, have you bundled different companies within one umbrella policy? There are some carriers that say, “Hey, my primary brand is AAA Title, but I have an affiliated brands and it’s easier to bundle them and add them as additional insureds and you can do that and you can save money. But, if you have other partners that are owners in those affiliated brands, you may them at risk because you may have a claim over here on one affiliated brand that come renewal time, it could affect down stream or cross stream everyone else. I think the biggest thing that you can make sure is one you don’t have a claim, if you do have a claim that all of those triggering events. You get drawn into things that absolutely outside of your control. You can get sued for anything that anybody can just concoct and imagine and file in a suit that you have to defend against. It doesn’t mean you did anything wrong, but you tendered a claim. So, always be transparent with your carrier and I just can’t say Enough, the documentation and how you handle those issue can seperate you from someone that maybe is denied coverage in the future. If there is a claim and they have to pay out or somebody say “hey this one was just a risk.” I mean its insurance guys, collect premium in exchange for risk. We just have to make sure that they understand that. That was a great question.

– All right, we’re out of time for this month’s webinar. We appreciate you joining and look forward to seeing you next month.

– Awesome, Great take care

– Have a good one.

AUTHOR

Tyler Adams

Co-Founder. Product Manager. Design Enthusiast. Amazing Racer.

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