Named insured wording: Doing it right

Improving the Named Insured wording can yield competitive results

there is nothing more "personal" to a business than its name. And, emotions aside, there are important business (and E&O) reasons for doing it right. Here is my personal rule of thumb. If the Named Insured wording fits into the Named Insured space on the dec (declarations) page, somebody didn't do a complete job. In this article, we're going to talk about how to properly compose the Named Insured wording, and how to use it in a sales situation. A well-worded Named Insured endorsement, after all, is a non-money endorsement, one of my favorite competitive tools.

A non-money endorsement is one that you can use to make your proposal and your coverage better than the competition, without raising the premium. More important, since most producers are focused on premium, this is an area that tends to be overlooked. (Editor's note: For more information about non-money endorsements see Barry Klein's article in the December 2002 issue of Rough Notes, or access the article online at www.roughnotes.com/rnmagazine/se arch/marketing/02_12p48.htm.)

Recommending an improved Named Insured wording has some very real competitive results:

It establishes your professionalism.

It graphically points out a weakness of the holding broker.

Assuming that other would-be producers didn't recommend the same thing, it puts you ahead of the pack.

It does all this without raising the premium.

First, however, you have to gather the complete information to create a well-written Named Insured endorsement. Ideally, you are completing a survey questionnaire of some type when you are gathering the current account information before quoting on an account. If you are working with an existing customer, then you should be re-surveying (or at least "confirming") the information each year, to see if anything has changed.

Here is some of the information you need to gather:

What are all the entities (such as corporations, partnerships, and joint ventures) in which the insured has an interest? What jurisdiction is each based in?

What are all the DBAs that the insured uses?

Does the insured use any "trade names"?

What are the complete names of all the principal owners and officers, including their spouses' names?

Samples of advertising and packaging materials.

This part of your overall information gathering should be done at the very beginning-for several reasons. One reason is that most other producers short-change this area, so you immediately identify yourself as being different from all the other agents the prospect has talked to. Also, there is nothing more personal to someone, or some business, than his or its name. If the prospect asks why you're asking all these questions, you can simply explain that you're going to recommend some improvements in the prospect's insurance program that will make it better without costing any more, and start planting seeds of doubt about the current agent.

Now let's get down to the nittygritty and talk about how to construct the Named Insured wording.

Since we're almost always going to take more room than the dec page allows, you should put a "placeholder" on the dec page. It would read something like this:

"Johnson Machine Works, Inc. (see separately attached wording)"

Now, on a separate sheet of paper (which will be attached to the application), you start assembling the Named Insured wording. Presumably, you're using a word processor (such as Microsoft Word) to write and edit this.

Start by listing the first (preferably primary) entity as a separate item, including the full name, the legal structure (corporation, for example), the jurisdiction, and followed by a semicolon. Here is a sample:

"Johnson Machine Works, Inc., an Illinois corporation;"

Next, take each DBA that this first entity has, and list it (again, as a separate item) in this format:

"Johnson Machine Works, Inc., DBA Johnson Milled Products; Johnson Machine Works, Inc.,

DBA Johnson Brass Fittings" Trust me, it is going to take some digging to get all the information you need to do this right. Once you think your prospect has given you all of the company's entities, go over the list again and ask if there are any other entities that the company either has now or has had in the recent past. You may get three of four additional "Oh, yeah's" out of it.

Don't forget to ask for copies of any advertising that the prospect has done, especially in business trade magazines. You also want to see the packaging the company uses (in many cases, it will be too large-- such as boxes and cartons-to take samples). Both of these are likely to yield additional names that the prospect didn't include in the above list. Often you'll find that the packaging, for example, has a consistent "theme" that includes what is essentially a trade name, and you should add that as another DBA:

"Johnson Machine Works, Inc., DBA SureFit Fittings;"

Once you have all of these for the first entity, you're just starting. Most businesses will have multiple entities, which you'll find when you start digging. Remember, your job is to protect the insured, and you have no way of knowing what name some lawyer is going to use when filing a suit.

Another common item to watch for is entities that the key owners and executives have formed to buy and lease, to the corporation, large-- ticket items such as the buildings and/or major equipment:

"William R. Johnson, Sr., and William R. Johnson, Jr., an Illinois partnership; William R. Johnson, Sr., and William R. Johnson, Jr., DBA WRJ2 Holdings;"

Now we're getting to the part where you are most likely to find a serious mistake-and which has the most "pizzazz" as a sales tool. You need to ferret out the complete names of all the key owners and executives, and their spouses. This is the area where we move from science to art. There will be some point at which an account gets so large (think General Motors) that this isn't appropriate. Most accounts aren't GM, however.

"William R. Johnson, Sr., and Edith M. Johnson, as individuals; William R. Johnson, Jr., and Mary R. Johnson, as individuals; Robert M. Bailey and JoAnne J. Bailey, as individuals;"

Last, in composing the wording, you want to tie it all together with:

"Each as their interest may appear."

How realistic is it to get all this information, in a competitive situation? Very realistic, if you're a good producer. What's going to happen, ideally, is that you and the prospect are going to spend a significant chunk of the time the prospect promised you on this one item. So you're going to have to come back-that's a good thing-to get the rest of your survey questionnaire completed, which means that the prospect is making an investment in you and you're building a relationship with the prospect.

At least a third of your prospects, maybe even half of them, will come out with some version of the following: "I've been buying insurance for years, and nobody has ever had me furnish all this information before. Why do you need it, just to give me a quote?" BAM!! He just told you that you've already distinguished yourself from all the other agents he's ever had.

You need to be able to explain why you're doing this, of course. The reason is that you're a professional agent, and you're going to make sure that every entity, every DBA, every trade name, and every key person is named on the policy, so that there's absolutely no way for there to be any gap, in case there is ever a question as to whether that person or entity is covered under the policy.

Any good lawyer is certain to name the main entity, where the assets are, right? What if the lawyer isn't a good one? Or, what it the plaintiff intentionally wants to cause problems, by naming an individual for a business act (that wouldn't be covered under personal liability coverage)? Are you relying on standard policy wording to cover them? Maybe it will, but maybe not. Occasionally companies will have some key players who aren't actually officers or even employees. Don't leave any holes, and don't make assumptions or rely on standard policy wording.

It's better to do it right, every time. And it makes for an excellent opportunity to talk to your prospect about something that others overlook, and doesn't even cost money.

The author

G. Barry Klein, CPCU, CLU, is director of ebixExchange, which provides interface products and services to the insurance carrier marketplace. A former insurance agent, Klein also maintains the industry reference site, www.ultimateinsurancelinks.com. He can be reached at barry@barryklein.com.

Copyright Rough Notes Co., Inc. Mar 2003
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