In this episode, we discuss what underwriting should expect from their inspection reports. We provide several key ideas to improve results and make inspections part of a dynamic and efficient workflow.
Inspectacast
Season 2 Episode 8
Unedited Transcript
Broadcast Date - 7/28/2020
Caster - T LeGros
Copyright 2020 Preferred Reports and Windowless Media Atlanta
Today is Tuesday July 28. And this is Inspectacast sponsored by Preferred Reports.
Hello, and welcome to the eighth show of the second season of Inspectacast sponsored by Preferred Reports. And in this show, we're going to focus on what to expect from your inspections vendor. Before we get into that, let's take a look at some recent news. A letter was sent from 150 healthcare experts do the government asking that the government be closed down for another reset like we had back in March and April when the numbers were peaking and we had the curve that needs to be flattened. There has been a rise of infections, although there has not been as large an increase in hospitalizations or deaths. And there hasn't been a major shortage of ventilators or ICU beds. Now this could be for a number of reasons. Either The virus is affecting people that are a little bit hardier. Or, more than likely, the reason is the hospitals have learned to properly treat the disease and they're able to do it without compromising their resources. However, there's also this other thing that's going on, which is a push to have everyone wear masks. And even in some cases, some states want to have people wear masks inside their own home. Although some of that defies any logic, one would be able to see that wearing a mask certainly would protect other people from somebody with the disease because the mask would keep anything that they would call or, or spit inside the mask, it wouldn't get out so I can see some value with that. But as far as protecting you otherwise, if you're wearing a mask and it's protecting you from something that's a little bit less useful because people generally aren't wearing them correctly or you still have your your eyes exposed and splash materials can enter through your eyes, through your tear ducts, etc. into the body. So, I mean, there's some question about it. Obviously, you Using a mask may be more beneficial than not using one. But all of these things fall into an overall category of things that will stop the economy from reopening. If we do go into a sort of reset mode, or once again, people are asked to voluntarily stay home, they mask it other ways, but to voluntarily stay home and not go out and to shut businesses down by by temporarily suspending their operating permits or whatever. That's going to be a problem not only for the economy, but also for the insurance business, because you're going to see restaurants that are just barely making it now due to restrictions. They're going to be out of business, you're going to see movie theaters, gone, cruise ships gone, a lot of the services sector is going to really be hurting. So that's also going to lead to less bills, less businesses looking for insurance, which means less inspections, which means overall, the insurance industry will get hurt just as much as the American economy will be hurt. So hopefully we'll be able to get a grip on this when a vaccine comes out. And in fact, it was just announced today that One of the vaccines that are being developed, I believe that's in conjunction with Emory here in Atlanta, is going on their one of their final trial periods where they're going to have 30,000 healthy patients that they're going to vaccinate and see how it works. So hopefully that will give them an opportunity to maybe have the vaccine ready at the end of the year. And we will be able to put this chapter behind us provided the vaccine is effective. So let's get into really what is an inspection? What are you ordering when you order an inspection? Well, according to the insurance Institute's inspections are ordered when underwriters want someone other than the agent or broker to make a physical visit to check out the risk. And the risk in this case, for people who are not in the insurance business that may be listening to this. Our risk is the insured or the property that's being insured, whichever is a collective term, the risk the risk that the insurance company is taking. So basically, when you have a policy that you're underwriting and you have some questions about or you want to take a look at it or the underwriter requires an inspection depending on the premium level. You We're going to go ahead and request an inspection either is going to come from internal staff, or more economically, it will be outsourced to a company like preferred to go run. Because, well, you went to the hopefully you listen to the outsource show last week, if you didn't do and you'll understand why I'm saying it's better. But an inspection is then assigned to an inspector. And from there, that inspector handles the inspection from appointment call to submitting the report.
There's some things that you need to look for, and you should expect from your vendor, and that is the report should be customized to your need and easily fit into your workflow. It should be designed to make it easy to identify any issues so that it can be selected faster for review in the underwriting department. Throughout the years, and literally decades and decades of loss control work. The forum's really haven't changed a whole lot. They're getting better with the injection of data and some other changes but but basically, it's still the same format that the big insurance companies used 60 years ago or even further back. If you look at some of the old underwriting manual It's still the same stuff that people asked for fire protection policies 100 years ago, you know, what is the building construction class? What is it built next to? Is it a wood frame building that's next door to a blacksmith shop? That Could you know, cinders could catch it on fire or whatever. Is there some type of water cistern that's nearby that the steam powered fire engine can come by and pump water on? Those things really haven't changed? Those questions are still on the on the reports, where's the nearest fire hydrant? Where's the nearest fire station? What type of fire department is it? What is the public protection class rating or the A s rating or whatever that shows what the rating of the fire department is? Is it volunteer full time, partial paid, whatever. All those things go into it. And the reports haven't changed a lot of that stuff still on there. The problem is there's a lot of stuff on there that just gums up the works. It doesn't allow you to quickly see what's wrong. So one of the things that you can do is hazard scoring, which is each answer has this score. And once you reach a certain score threshold, then you take a closer look at the report. So if everything that was bad scored a point of some kind, okay, whether one point 100 points, it doesn't matter, just some kind of thing that would count. If you had a report that was not zero, if it had 10, then you know that there's things wrong with it. And if you had a threshold of anything that had has your score over 30, that you would take a very close look at because that could be potentially something that you would cancel, then you would go ahead and go through your reports and anything that was at 30 or above, you pull out and take a look at first because those are the ones you might need to get a notice of cancellation out on or work with the agent and the insured with very special recommendations and conditions to insure the property. The other thing you can do, we call it promoted fields, but different vendors may call it differently. And that's where you may have a a series of questions in a report. But there are maybe five questions that you really think are important. And those five questions are the five things that you look for. So instead of having to go dig through the report You take the answers to those five questions and have them repeated on a cover sheet or somewhere up front. So that way you can immediately see if there's any kind of issues. Now, the report should be synced with your own underwriting requirements. And that would be that the things that you would promote, for instance, I'll give you an example apartments with no pool. Let's say you have a special apartment program that only does, you know, small apartment complexes that have no common area with pool. Well, if the pool is on property, and they're going to have a question that says, Is there a pool? Yes or no? If they answer yes, you're going to want to see that flag at the top. So the first question on your report, when you open up to the summary page, pool indicated or pool, not there, or however you want to do it. Same thing if you're insuring a restaurant and part of the program says they cannot do any delivery themselves. In other words, Uber Eats whoever they can sell to that that's just like selling to any other customer. But instead they're using their own employees or their own employees cars to go deliver. Well, if the inspector finds that, in fact, the restaurant does have a home delivery service that's done within time. mile radius or whatever the restaurant, then that we flag on your report to. Same thing, if you have a restaurant, that you don't want to have it over a certain percentage of alcohol sales, like let's say that alcohol sales can exceed 40% of total revenue. If you have a restaurant where the alcohol sales are really 80%, then they're just a bar that happens to serve some food. And that falls outside of the program that you might try to be getting them insured with. So really, whatever you want, whatever No, no you have that excludes a risk from any type of program, or, or anything that you're interested in covering if it's not within your risk appetite. That's what you need to know first. And it's been my belief for quite some time. And we tried to model inspections off of this is where reports should be by exception. It means you only look at what's wrong, and not everything. That's right. In fact, if it's right, it's irrelevant. That means that's not a problem for you. You want to know what the problems are. And that's what should be put in the report. That's what should be flagged. I'm not saying that you don't have them check on things anyway, because To find out if something's missing, you have to ask if it's there in the first place, or you have to look for it. It's just that you take out the important things and flag it to where you can quickly look through a 10 page report and get the three items that you need to know that you have to call the agent or you have to go to a senior underwriter or you have to do something to get some permission to continue on that risk, or to dump it or change the premium or look for another program. Those are the things that you need. Now, just getting your form set up is is really a challenge. Because depending on who you're using, and what type of software they have, or what type of platform they have, they may not be very adaptable to customization. But if they are and hopefully they are, you need to keep things simple. For those of you who remember the TV show dragnet
with jack Webb, just the facts. You don't have time for a lot of fluff. You don't have time to know that the roof isn't leaking. You want to know that the roof is leaking so you don't care about the question that says roof leaking. No, you want the one That says roof leaking. Yes. And those are the things you want to pay to pay attention to. So when you're designing your forms, and I strongly urge you to get with your vendors to build the forms that you want, that you need, that gives you the information the way you want it how you want it, okay. And if they can't do that, then come to a company like preferred that can and that will work with you to build all sorts of things that will give you the alerts to let you triage your reports as they come in. Simplicity is the key. If you get complicated with your scoring, if you get complicated with all the different bells and whistles, then it not only confuses the inspector potentially, but it will also make it more convoluted for you and your workflow, trying to figure out what's really a bad risk, or what's one that the sensitivity is too high on these hazard scores, we're getting these big hazard reports back that in fact, it's not really your risk that we're afraid of, it's not really a problem. Those are things that you need to fix. Now, just like in the dragnet show where they read you your rights, I'm going to tell you about your rights, your expectations that you should have on these reports. after this break thanks in large part the pandemic our economy contracted in early 2020. The insurance market is hardening and the future is unclear. companies may look to cost reductions to maintain profitable operations that past history tells us anything is that loss control is one of the functions they look to for savings for for reports has experienced consultants to provide not just underwriting surveys, they can also create service plans, deliver training, and work as risk advisors for any size account. Covered reports can provide any level of risk control service your company needs, and we'll work with you to make any transition easier for all preferred reports help you meet your financial goals in 2020 and beyond. For more information, contact preferred reports at info at preferred reports calm that's info i n fo at preferred reports calm Alright, let's talk about what your rights are what you have the right to expect from your underwriting surveys or your field inspection reports. First of all, you have the right to an on time report. We all know how important it is to make sure you're getting your report within that discovery period, it could be 30 days, 45 days, 60 days, whatever. But you don't have that entire time to wait for a report to come back. Your other option, of course, is to set up some type of contingency. And it really depends on state regulations or how the program set up that would say, yeah, we're going to cover you contingent on a good loss control report or if there's recommendations contingent on fulfillment of recommendations, but face it, that still puts you on a risk that may not be a risk you want to be on for some time, not just the original discovery period you're on. So on top of that, you have the right to be advised of legitimate delays. Any vendor should have a series of milestones that they look at that are triggers for some type of contact that they make either multiple times to the insured, and then to the agent for assistance. And then Filing to the underwriter and then it'll be up to you at that point to determine whether or not to continue on to cancel the report to cancel policy, whatever. But at least it gives you the opportunity to make a decision. There are some agreements with some vendors out there, I'm sure that say two calls to the insurer, one call to the agent, wait five days if no activity they close it out. That's up to you if you want to allow that. I don't recommend that because you really should be in control of the process as the underwriter you should be the one that controls whether or not a report is closed out. I mean, it all depends on the agreements that you have, of course, and whatever financial deals there are, but but it's important that if you control the Closeout process, it will avoid rapid close outs. In other words, you'll get it you'll get a situation some of you may have already seen this to where an inspection will literally be with an inspection company for 12 days and they close it out because they made their two phone calls insurer, one call to the agent, no activity done, boom done. And you end up either having to reorder a report, incur some more expenses, or issue a notice of cancellation or just sit on the report, or rather sit on the inspection because you don't want to, you know, cause issues with the agent cause issues with the program or whatever. And, you know, maybe we didn't look that bad on paper, and heaven forbid, you actually end up getting claims on it. Next, you have the right to know that the rep went to the right place, and that they actually sent the right kind of rep to the right place at the right time to collect the right information. And one of the ways that you can confirm that, especially for no contact reports, is to require an address verification photo, that address verification photo
kind of doesn't make much sense. Well, of course, they're going to go right place. Well, if it's a no contact inspection, and depending on some states, you get into, especially up in New York, for instance, or down in Miami, parts of Florida, whatever you're going to have where it's West 59th Street, West 59th place, West 59th court West 59th Boulevard and depending on the zip code, you In there may be more than one West 59th place in the same city, but different zip code, or the cities, especially when you get out. For instance, on the Jersey Shore, there are some cities that have the same name streets. And it may be either a regular name like Columbia, or it could be a numbered Street. And literally, a zip code is what separates it, even though they're both have the same name. And in some cases, I've even seen one case where the zip code was the same. You just had to figure out which was which. And without an address verification photograph is very difficult for you as the underwriter to know that. And one of the things that I'm sure you probably do if you don't have a copy of their old inspection report is to look at Zillow, Google Earth or whatever to see what comes back. And before warned, they're not always accurate either. But obviously, if the address doesn't match, or at least match what you've requested, then that should be a question that you sent back to the vendor on asking them to confirm that this was the right place. Now, for as far as the right rep goes, You need to make sure that your vendor has vendor appearance standards. That means they have it cards that you're required to wear, ours is business casual, it may be different depending on the type of inspections and vendor that you use. But regardless, there has to be some standard. And remember, they're sometimes the only face that the insurance will ever see of the insurance company may be the inspector that comes out. So you want to put a good face forward that way. And finally, make sure that the rep knows how to inspect the risk and obtain the needed information. You don't want a situation where somebody who's not familiar with your program not familiar with your underwriting standards, not familiar with your requirements to go out and then ask the wrong information or ask the wrong questions, come back with the wrong information. The report doesn't give you what you need to make your underwriting decision. And you end up having to go through some kind of dispute process with your vendor. Now I'm sure I'm going to get some emails and say, you know, we had similar problems with you in the past true. There's always going to be exceptions. There's always going to be problems. You're going to have uncooperative insurance, you're going to have inspectors that maybe didn't do a good job for that particular inspection. But those are all feedback that your vendor needs to have. So that way they can make sure the process gets better. And that's one thing that is really key is the communications. If you send in a email that says, hey, I've got a problem with this report, you shouldn't have to wait three weeks to get something back. It should be a pretty quick turnaround on the question that you have. Another thing that we get we hear all the time is you need to have a right to good photographs. Nowadays. Face it, we all have digital cameras there on our phones. Some inspectors still carry separate cameras, especially the older ones, or maybe the ones that don't carry iPhones, they'll have a separate camera that they've used for a while. But face it with a digital camera, you can see exactly the photograph that you took. There's no reason to have a dark or blurry photograph on the report. And I know our quality department depending on what the situation is, especially if it's an external report, we'll send them back out with internal with interior shots is a little bit different unless it's very critical because you don't want to inconvenience the insured with another visit because that's likely to trigger a complaint to the to the agent and then Your agent talks to rather the agent talks to your salespeople and it goes up the chain. You want to make sure that not only their photographs, well lighted visit, you know, not blurry and framed well. But you also want to make sure that all the hazards that were identified in that report, and all the recommendations that were made, are photographed as much as possible. For instance, if there is a recommendation for a lack of fire extinguishers, it's very difficult to take a photograph of something that isn't there. But certainly there are ones where if it's a cracked pavement, missing handrails, whatever, you certainly can provide documentation for that. And finally, with respect to recommendations, you pretty much have the right to expect useful and appropriate recommendations. And these recommendations are oftentimes shared with the insured without you even approving or disapproving of it. It all depends on whatever process you have set up with your vendor. So it does impact your credibility if you send a recommendation to an insurer that is not applicable to their operation at all. He was just triggered or fired off due to an error in the form that's happened here before. And we've certainly fixed those sort of things they do happen. But it's stuff that you want to make sure happens in a very minimal way and doesn't impact your credibility. The bottom line is, you should play a very big role in what your recommendations are, what they're used for and when they're used. And you should be the one ultimately that determines how critical versus advisory or however you want to name the Rex is based on your risk appetite, your program requirements, and your underwriting guidelines. Just because for another client, a missing handrail might be a critical rack that they would cancel a policy on. If yours allows for recommendations and gives them time to fix it, then there's no reason to make it a critical wreck as an advisory rack or as a mandatory rack that you have 90 days to fix or whatever. It's a little bit different than using the term critical. So it's really up to you to fashion that. There's really no reason to accept an off the shelf solution. There's It should always be customized. So to summarize, I guess our takeaway is work with your vendors so that they know what your expectations are, and build a process that fits your needs. Make sure that the forms that you're using are customized to your needs asking the questions that you need information on in the way that you want to ask and work that process out. So that way it helps your underwriting department make rapid decisions on these reports as they come in. If you're especially, let's say, your personalized underwriting department, and you're literally doing thousands upon thousands of inspections a month and naturally I don't think anybody has an underwriting department with a couple of hundred underwriters that look at these thousands usually you have a couple of handful of very overworked people looking at these things. You want to have that process streamlined to where you look at the top sheet of that report, and it should have three critical things that you need to look at. And if any of those answers are Yes, that goes over in your cancellation pile or your investigate later pile or in your workflow goes to another underwriter that specializes just in those things who however you want to work it out. But you should be able to have a trigger that shows it off that way. Well, thanks a lot for spending another Tuesday evening with me. Hopefully you'll tune in for the next one. Not sure what that topic is, it'll be published. As soon as we figure it out. I like to try to stay pretty much on point with things that are going on. So we don't do a lot of arranging in advance to make really stale shows. But I guarantee you, it'll be something to do with insurance inspections and insurance underwriting because that's kind of what we do. So thanks a lot. This has been inspector cast sponsored by preferred reports.
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