As an insurance agent who has spent quite a bit of time riding the addiction trade show circuit learning the industry’s history and nuances, I have seen the same three reoccurring pitfalls when operations purchase insurance. There is a total lack of understanding by their agent, decisions are made solely on price, and the policies are not worth the premium as they are limited down to nothing by exclusions. For these three reasons alone I have chosen to provide the following explanation to assist the industry as a whole by giving each individual operation the tools needed to protect what it is they have worked so hard to build. The industry is successful because each addiction treatment or recovery business is complementary to the next. One way to ensure the industry continues to prosper and fight this disease is by having proper insurance in place for each and every operation.
Unfortunately the first major pitfall of selecting the proper insurance strategy begins at the top with the actual insurer. For most insurance companies, the addiction industry is not an area for which much time is spent or much effort is made to understand. Often times when underwriting addiction treatment facilities underwriters squeeze the exposure into a box it does not fit, like Miscellaneous Healthcare or Developmental Programs. The addiction industry services a specific sector of the community; those in need of treatment for or recovery from addiction.
Thusly, the insurance coverage should be as specific as the service provided. The lack of understanding trickles down from the carrier to the agent (your agent) and ultimately to you. The licensed insurance agents who take direction from the carriers they represent are presenting misinformation and guiding the insured down a path of false understanding.
The second pitfall is a direct reflection of the first: Price. Is the lowest price the best? Perhaps. When shopping for the same car from different dealerships, the lowest price is the best as the product is the same. However, price is not and should never be the primary decision in
Securing the right insurance for your business. A facility has been paying their insurance bill on time for years, claims free, when the day comes that a claim must be filed. They call their agent to file the claim, the agent takes a look at the policy, and regretfully, there is no coverage for that loss. The policy that would have covered that loss is 20% more than what you are paying, and you asked for the budget friendly policy. I can only imagine what an awful feeling that must be. Price is important, and when the proper coverage has been secured there is healthy competition in the space for the opportunity of a price reduction. The pitfall is that price is put in front of coverage, when it should be the other way around.
Coverage gap is the third major pitfall, and is a tragic result of a lack of understanding and the “price is primary” way of thinking. In the hole where coverage once was, due to an underwriting error, agent ignorance, sits the dirtiest word in the world of insurance: Exclusion. Insurance policies start off broad. “We cover it.” Then, exclusion by exclusion the policy is carved down to a manageable exposure at a reasonable price. Exclusions are necessary as the policy simply cannot cover everything; it is not designed to and would be unaffordable if it did. The pitfall occurs when part of your operation is excluded due to a failure to understand the policy, or requiring that the price needs to be below a certain “magic number” for you to accept the expense; so an exclusion is added here and there to hit your mark. It is like having a bowl full of ingredients to bake a cake: If you start removing ingredients, you are eventually left with a bitter tasting mess that is no more useful than a door-stop.
The Way Out:
When the owner or empowered decision maker of an addiction treatment or recovery operation begins the procurement process for insurance (or the renewal process), the first place to start is within their own organization. Review what it is you actually do so that you can properly relay what it is you need insurance for. An intensive detox facility needs something different than a peer supervised recovery residence, and a methadone clinic will need a different strategy than an I.O.P. Once you can relay what it is you do to your insurance agent, only then can they approach the proper insurer to offer the proper coverage; that is, if that agent knows anything about the industry themselves. Responsibility should be placed on the agent to educate themselves on industry they are attempting to serve. Once everyone is speaking the same language, you can move on to reviewing your proposals with confidence.
When you receive a proposal from the agent with whom you have chosen to do business, look at the coverage before you look at the premium. You are attempting, from this point, to make a coverage decision, not a price decision. To reiterate what was touched on above: You can save money. There is nothing wrong with that. But you should not save money at the cost of the coverage you need or thought you had. You can request a proposal that offers amazing coverage, as well as a dialed back proposal, and then the decision is yours whether or not to carry the superior policy. The insurers and agents who do focus within this industry represent specialized programs that offer the right coverage at competitive pricing.
The level of coverage that is desired, and the comfort level that comes with it, is unique to each facility. I have seen co-ed recovery residences with an Abuse & Molestation exclusion, I.O.P’s without Professional Liability, and a Detox facility for ex-cons without Assault & Battery coverage. Some knew and were ok with it, while others had no idea. It is imperative to know the limitations of one’s policy so that it can either be corrected or expected. Claims happen, and decades of being claim free are in no way a prediction of what will happen tomorrow. Society is becoming more and more litigious, and the expectations of your clients and their families have risen. The competition with your own industry has raised the level of offered services. The statements and promises that are made to clients, and the success stories you have on you websites, are testaments to the quality you provide. So if and when you fail to keep a client healthy in the eyes of the court, you have failed to perform the duty for which you collected compensation. The proof you are able to be successful is in your brochures, on your website, and quite possibly painted on the walls of your facility. When that anomaly occurs, either your insurance is defending and paying damages, or you are; either way a lawyer is getting paid. The time and effort you have put into building your brand and business cannot be valued; however, a former client of yours and their lawyers can and will put a value to what their suffering is and will be – will your policy respond to the claim?
Call to Action:
The time has come to move the sticky note on your computer monitor that says “review insurance” to your to-do list. Call an agent, have a meeting, and ask the tough questions. If your agent is the person that wrote your uncles car insurance 20 year ago and they have been renewing your same policy year after year, perhaps it is time for a new set of eyes to assist with your review. It is time to be confident in what you spend your money on. You pay the power bill and so feel confident that when you flip a switch the light will come on – why not have that same feeling when you tear out the check for your insurance premium? Know that you saved money this year, by finding an alternative policy or scaling back your coverage. If you decided to spend more this year, at least know you have what it is you always thought you had. Most importantly, read and know your policy; it is a contract between you and the insurance company facilitated by an agent, but the policy is yours. If you have a concern, bring it up. If you don’t know, ask.
The article was written by an insurance agent who insures both for-profit and not-for-profit operations in the addiction industry. The opinions and suggestions are based on experience.
For more information on this topic please email Lee M. Goldberg, MBA, CIC at firstname.lastname@example.org or call 954-452-4900 ext. 317.
Lee can be reached for policy review services, proposal requests, or general questions.
Lee M. Goldberg, MBA, CIC BB Insurance Marketing Inc.
10167 W Sunrise Blvd 3rd Floor
Plantation, FL 33322
954-452-4900 ext. 317