It’s National Umbrella Day - Time to Raise Your Roof!
At a time when pandemic and Property news dominate insurance industry headlines, sound Umbrella product management sometimes takes a back seat, despite its impact on insurers’ financial results. A healthy Umbrella program can boost retentions and help you grow your business. Yet, it is a challenge for insurers to remain abreast of Umbrella trends because those developments are often crowded out of the insurance conversation and by the events of life.
Challenges for the Umbrella Line
That challenge is exacerbated, in part, because most regulatory reporting for Umbrella products falls into the “Other Liability” category, which includes a constellation of Specialty Casualty lines. Umbrella is therefore not easily isolated for study. Moreover, the cost of goods sold for Umbrella is not measurable for years, sometimes decades. Emerging trends, unexpected changes in exposure, and shifts in activities and operations all play a part in making pricing difficult at best.
Social inflation continues to drive higher verdicts in both Commercial and Personal lines. Juries are increasingly desensitized to high awards, often leading to a chasm between the dollars necessary to make a claimant “whole” on the one hand, and on the other hand, the dollars designed to punish the perceived “haves” of society, whether they are individuals or businesses.
Meanwhile, awards are meaningless without the dollars to pay them. A thin check is better than a fat judgment. So, insurance carriers must maintain financial strength to keep the promises they make, since skilled legal talent seeks policy limits to fund awards. Insurance Umbrellas can have limits as low as $500,000 for a homeowner or many millions of dollars for a commercial operation. Large claims and shock verdicts pay no attention to policy limits. The limits purchased depend on risk tolerance, affordability, and asset protection needs.
Umbrella Connotations and Denotations - From a Lighter to a Substantive Note
The play on words for Umbrella is fun:
- I like to think of a rainy-day umbrella as a portable roof. Umbrella is also a term that represents an overall situation or topic, such as the pandemic that has united us as an industry as never before.
- According to Merriam-Webster Dictionary, “umbrella” was borrowed from the Italian word “ombrella,” a diminutive modification of the Latin “umbella,” which came from “umbra,” meaning "shade, shadow." “Umbrella” means "little shade,” and has come to mean our very own little shade from the rain.
- During a storm, we know that the cheapest portable umbrella can’t possibly offer the same protection as the wind resistant golf umbrella - a good metaphor for the quality of an Umbrella insurance product.
As we all know, when used in insurance, the term “Umbrella” names a product that transfers economic risk (subject to policy terms) arising out of significant accidents, with the rainiest of days calling for financial recovery at a minimum. The cost of some catastrophic losses is immeasurable when an accident permanently changes the quality of life, or sadly, costs life itself. This immeasurability drives the upward pressure of economic awards, and it seems infinite.
Claim Stories - The Need for Umbrella Coverage
Personal Umbrella - An insured was helping a friend move when he bumped into her, causing her to fall. She filed a claim against him to pay for her injuries, including a broken wrist and hip, both requiring surgeries.
Commercial Umbrella - A pedestrian, who was walking in front of a condominium building, tripped and fell over an “uneven” surface. The pedestrian is asking for medical damages as well as indirect damages for her injuries. Both the homeowner association’s primary policy and Umbrella are in play to cover the cost.
Personal Umbrella - A babysitter left an infant unattended in a walker. The infant toppled the walker, struck her head on the floor and suffered brain damage. The court awarded the infant’s parents $11,000,000.
Commercial Umbrella - While walking on the sidewalk in front of an insured commercial building, the 46-year-old plaintiff stepped into the street to avoid the insured’s lawn sprinkler sidewalk overspray and was struck by a car and killed instantly. The insured building owners violated a city ordinance that does not allow water from a sprinkler system to extend to the adjoining sidewalk. The insured pled “no contention” to this charge in court, and an Umbrella-limit settlement resulted.
Personal Umbrella - An insured’s daughter reportedly hated math class as well as the teacher. The daughter made several disparaging and false remarks about her teacher online. The teacher filed a tort claim against the parents and recovered $750,000.
Commercial Umbrella - An insured driver approached an intersection, disregarded the stop sign, and struck the driver’s side of the claimant vehicle, killing its occupants.
Source: Gen Re data
Under an Umbrella - Sharing the Risk of High Awards
These claim stories demonstrate that bad things can happen any time, despite an insured’s best intentions to practice safety. And when bad things happen, the quality of the insurer’s and reinsurer’s promises matter. Insurers do not have to weather severe Casualty exposure on their own. Gen Re has a longstanding history of sharing Umbrella risk on a large scale with our clients and offering a meaningful and credible vantage point on loss trends. We mine our data and use our resources to address emerging issues and bring our best recommendations to the table, in line with a company’s overall business strategy.
With our help, good Umbrella management offers an opportunity to increase retentions, grow your business, and raise the roof on your success. With an Umbrella policy and a sound risk-sharing program in place, you can be prepared for expected and unexpected storms.
Reach out to us today to discuss your product management needs.