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ISO Products Perspective

Market Segment Programs: Seeking the perfect

Property and liability coverage additions, higher limits provide customized solutions

By Patricia B. Prial

Increased competition for business has become the norm in recent years. Slow growth in the business community at large can impede growing a book of business organically, and customer retention is an ever-present challenge. To stand out and attract additional business, many insurers are interested in specific, identified market segments. But doing so with traditional commercial or liability policies can prove challenging—like trying to fit the proverbial square peg in a round hole.

Trends in insurance policy packaging have evolved over time. Early on, standardization of programs was a major goal. In those formative years, uniformity in coverage provisions and the like helped with regulation of the industry, contributed to market stability, and supported claims handling. While certain classifications of risk did have tailored policy language (for example, focusing on manufacturers), the emphasis on standardization was strong—and for good reason. Consistent language often supports efficiency.

Traditional insurance programs tend to slot insureds into a one-size-fits-all solution: with similar coverages, similar exclusions, and similar limits. And while such standard programs might be the right fit for many insureds, that paradigm often leaves others in certain segments of the market with unaddressed needs, presenting opportunities for insurers to recognize and address those needs.

As competition increases and insurers seek to maximize premiums, specialization and market customization have blossomed. Specialized programs, or niches, that identify, carve out, and complement insureds' coverage needs can provide a competitive edge.

A niche market is often one that is distinguishable from the mainstream but has enough homogeneity and commonality to form a cohesive class. Most niches require the basic, traditional coverages, but they also tend to face unique exposures that may require specialized treatment. An agent needs to identify: What makes the client unique? Are all the client's exposures addressed? Does a client need more—or something different—from the conventional insurance products?

Recognizing such a need, ISO introduced an array of coverage tools tailored to specific market niches. In 1999, ISO launched its Market Segments line of business, with a portfolio of specialized products.

The 19 Market Segments programs ISO offers are:

• Apartment building owners

• Auto service risks

• Dry cleaning and laundry facilities

• Florists

• Funeral homes

• Golf courses

• Hardware and home improvement stores

• Health clubs and gyms

• Hotels, motels, and inns

• Janitorial services

• Landscapers

• Personal care services

• Pest control services

• Pet services

• Plumbing and HVAC contractors

• Restaurants

• Self-storage facilities

• Staffing firms

• Supermarkets

The programs consist of endorsements that "wrap around" underlying ISO Commercial Property and ISO General Liability Coverage Forms to tailor coverage to an industry segment. ISO's Market Segments programs contain many coverages that already are addressed in the underlying ISO base coverage forms. However, the terms of the coverage or the limits of insurance available are often enhanced. Also, the ISO Market Segments programs build in customized coverages unique to a particular market and offer optional endorsements.

Some examples of typical ISO Market Segments commercial property coverages that either expand coverage or increase limits from the underlying ISO Commercial Property terms are:

• Fire department service charge

• Money and securities

• Computer fraud

• Reward payment

• Forgery or alternation

• Accounts receivable

• Outdoor signs

• Valuable papers and records

• Personal effects and property of others

The limits and terms for such coverages in our programs are designed with the characteristics of the particular market segment in mind.

Examples of other commercial property type coverages focusing on industry-specific exposures are:

• Tenant move-back expenses coverage (apartment building owners)—addresses expenses that the insured incurs to move tenants back to the described premises from a temporary location in the event tenants must temporarily vacate. Such expenses include packing, transporting, and unpacking tenants' property.

• Employees' tools coverage (auto service risks)—provides coverage with respect to tools an insured's employees own.

• Customers' goods coverage (dry cleaning and laundry facilities)—provides coverage with respect to direct physical loss or damage to customers' property that was accepted for laundering, dry cleaning, pressing, dyeing, altering, or repairing.

• Key and lock replacement coverage (janitorial services)—addresses the cost to replace keys and locks at a customer's premises due to theft or other loss to keys entrusted to the insured.

Examples of general liability type coverages focusing on specific exposures are:

• Heating or air-conditioning loss reimbursement coverage (apartment building owners)—is designed to apply to sums that the insured pays voluntarily or because of a demand for a per-diem remuneration of rent from a tenant as a result of the complete loss of heat or air conditioning to a tenant's leased unit or apartment.

• Delivery errors and omissions coverage (florists)—provides coverage with respect to the failure to deliver or misdelivery of items that the insured sells.

• Veterinary expenses (pet services)—provides coverage with respect to veterinary expenses, including necessary medical, surgical, x-ray, dental, and hospital services for injury or illness resulting from an accident to animals.

The suite of ISO Market Segments programs also contains optional endorsements for both property- and liability-type coverages. Examples include:

• Funeral directors professional liability coverage (funeral homes)—is designed to extend coverage provided under the ISO Commercial General Liability Coverage Form with respect to bodily injury, property damage, personal and advertising injury, or other injury arising from the rendering or failure to render professional services in connection with the insured's business as a funeral director. Such coverage also addresses errors and omissions in the handling, embalming, disposal, burial, cremation, or disinterment of bodies.

• Fine arts coverage (hotels, motels, and inns)—provides coverage with respect to direct loss or damage to fine arts owned by the insured or owned by others and in the care, custody, or control of the insured.

• Hole-in-one prize indemnification coverage (golf courses)—provides coverage under the ISO Commercial General Liability Coverage Form with respect to hole-in-one prizes in the event the prize is won by a participant in a contest offered by and conducted on the insured's golf course.

As the liaison between the insured and the insurer, you are on the front line and as such are in a position to identify the insurance products that best fit your client's needs. Recognizing those needs and having a tailored market segment program available to address them helps to show that you aren't just trying to fit a square peg into a round hole, selling a one-size-fits-all product. Potential customers will be keen to identify with a specific ISO product that embraces their industry segment and recognizes their unique needs. Ultimately, that will help separate you from the pack, penetrate new markets, and create an affinity with your customer base.

The author

Patricia B. Prial is manager, Commercial Property, at ISO, a member of the Verisk Insurance Solutions group at Verisk Analytics.

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