Severe weather continues to wreak havoc across the country. The southeastern region of the United States has just endured devastating losses from a historic tornado outbreak and cleanup will take months, if not years. Excessive rainfall has caused several waterways, including the Mississippi River, to reach flood stage and thus more homes and businesses will be ruined in the coming weeks. Wildfires are burning in parts of the country due to terrible drought conditions, with smoke and fumes being reported hundreds of miles away. And of course, the 2011 hurricane season starts in less than a month and it is never too early to begin storm preparations. These natural disasters cannot be prevented, and the damage they leave behind can include environmental hazards that must be handled promptly and appropriately.

The aftermath of the recent tornado outbreak has left miles of debris and destruction. This debris contains hazardous substances such as friable asbestos, lead paint chips, and toxic chemicals. Past hurricanes have destroyed manufacturing facilities, gas stations, landfills, and petrochemical plants, resulting in chemicals and waste being released into the soil and groundwater. It is still unknown how much oil remains in the Gulf of Mexico from last year’s monumental oil spill; an active hurricane season could bring unexpected pollutants to the shore which will affect beachfront properties.

Any structure affected by a flooding event can and will leave mold to grow long after the water recedes, not to mention residue from other wastes, chemicals, and fluids that are flushed out of buildings as the floodwaters rise. Residents coming back to their properties to assess the damage will also be exposed to bacteria and infections that could lead to serious illnesses. Wildfires can spread quickly and change direction before firefighters can gain control, impacting any facility in its path. Should the fire come into contact with chemicals or other materials, pollutants may be released into the air and the ramifications of air pollution would be felt miles away.

The scenarios listed above will not be covered via a standard CGL or property policy, and the bodily injury/property damage claims will be massive.

Your clients may not think they have an environmental exposure from their daily operations, but as we all know, the weather can be unpredictable. Your client may be a property owner or manager, a manufacturer, a farmer, a doctor, a landfill owner or anything in between. It is important to note that they all have a pollution exposure. These organizations should be made aware of the coverages needed to properly protect them in the event of an environmental claim. To learn more about the insurance products available for these risks, the best policy configurations, and how to access the right insurance markets, contact your environmental wholesaler for more information.

To aid in the disaster relief effort, visit the sites below for information on making a donation or volunteering your time in the cleanup:

American Red Cross
Feeding America
The Salvation Army

Having options is a great way to demonstrate your expertise and commitment to your clients. Clearly, this is a good approach with new business opportunities, but marketing a renewal and encouraging your client to switch carriers on an existing account need to be carefully considered. In today’s market, many accounts are marketed to try to achieve a better price. While that is certainly a worthwhile goal, changing carriers on a renewal account may cause real problems.

Here are a few issues to consider:

• The agent needs to be fully aware of the specific coverage differences between the expiring policy and the new policy. Although both forms may be appropriate for the insured’s needs, there may be discrepancies between them that could potentially create gaps in coverage.
• There will always be differences in the carrier offering the coverage. Where one may have a solid A.M. Best rating and a history of handling claims effectively, another may have a lower rating and not have a successful claim track record. Service and stability add a great deal of value.
• If the agent is aware that there are enhancements on the expiring policy that may not seem too significant; yet they are not offered on the newer form—and a claim is filed—the agency may be held liable and have an E&O issue.
• Aggressively marketing a risk every year gives the insured a reputation in the marketplace. Many accounts do not get reviewed by companies because they see them every year and never write them. Unfortunately, there may be a time where the insured really needs to switch carriers and the carrier declines to quote.

Here are some steps that brokers will want to take if you are considering marketing an account at renewal:

1 – Review the account 90 days before expiration.

2 – Discuss the coverage options that may exist in the market to assess if there is a better product being offered.

3 – Assuming the insured is happy with the coverage and carrier on the risk, it is important to determine the target price or rate goals for the renewal.

4 – Confirm with the insured that if that premium or rate goal can be achieved with the incumbent carrier, they will renew.

5 – If the carrier cannot accommodate the requests, there is still time to go to other carriers and try to achieve the insured’s coverage and cost goals elsewhere.

This allows you to give the insured what they are looking for without running the risk of reducing their coverage or any of the other pitfalls of moving coverage to a different carrier. Even if alternative proposals from other carriers are requested, agents are still encouraged to send renewal information to the incumbent carrier. The insured should not move the program elsewhere without comparing any new proposals to the expiring policy.

For more information, please call us at 1-800-596-2156 or email us.

Have you ever read an article pertaining to environmental issues, or perhaps looked through an environmental report and noticed the same acronyms appearing over and over again? Or you are reviewing questions from your underwriter which include technical jargon you don’t encounter on a daily basis? Is your insured looking to you for help because they now need to comply with environmental regulations?  Below are essential phrases and abbreviations to help better explain the colorful world of environmental topics:

ACRONYMS:

RCRA – Resource Conservation and Recovery Act
CERCLA (aka Superfund) – Comprehensive Environmental Response, Compensation and Liability Act
TSD – Treatment, Storage, and Disposal facilities
SWMU – Solid Waste Management Units
TCLP – Toxicity Characteristics Leaching Procedure
VOC – Volatile Organic Compound
PCBs – Polychlorinated Biphenyls
PRP – Potentially Responsible Party
POTW – Publicly Owned Treatment Works
BOD – Biochemical Oxygen Demand
NPDES – National Pollution Discharge Elimination System
HSWA – Hazardous and Solid Waste Amendments
EPA – Environmental Protection Agency
NODs – Non Owned Disposal sites
WWTP – Wastewater Treatment Plant
NPL – National Priorities List
SARA – Superfund Amendments and Reauthorization Act
CWA – Clean Water Act
TSCA – Toxic Substances Control Act
MCLs – Maximum Contaminant Levels

DEFINITIONS:

Hazardous Waste – Wastes (solids, sludges, liquids, and containerized gases) other than radioactive (and infectious) wastes which, by reason of their chemical activity or toxic, explosive, corrosive, or other characteristics, cause danger or likely will cause danger to health or the environment, whether alone or when coming into contact with other waste.

Large Quantity Generators – facilities which generate over 1000 kg of waste per month.

Small Quantity Generators – facilities which generate less than 1000 kg of waste per month.

Solid Waste – garbage, refuse, sludge from waste treatment plant, water supply treatment plant, or air pollution control facility and other discarded material, including solid, liquid, semi-solid, or contained gaseous material resulting from industrial, commercial, mining, and agricultural operations and from community activities.

Potentially Responsible Parties – present and/or past owners, operators, generators, and transporters of contaminated sites.

Treatment facility – a facility which changes the physical or chemical characteristics of a waste, or degrades or destroys waste constituents, using any of a wide variety of physical, chemical, thermal, or biological methods.

Environmental monitoring – collecting samples of the environmental media and testing for the presence of hazardous substances that may have been released into the atmosphere.

Regulatory compliance – environmental regulations enforced by government entities to manage waste.

Leachate – combination of the direct precipitation infiltration and any liquids squeezed out as a result of consolidation of landfill waste materials.

Landfill – permanent placement of waste on or below land surface.

Fracking – a slang term for hydraulic fracturing. Fracking refers to the procedure of creating fractures in rocks and rock formations by injecting fluid into cracks to force them further open.
Carbon footprint – the total set of greenhouse gas emissions caused by an organization, event, product, or person.
Wetland mitigation – the replacement of wetland functions through the creation or restoration of wetlands.

As environmental coverages become more widely understood and companies are more aware of their environmental exposures, agents will receive more requests for environmental insurance. Having a higher comfort level with industry terms such as the ones included in our glossary above will allow you to more helpfully advise your current clients, and to also take advantage of potential opportunities to work with new classes of business.

2010 saw a rapid expansion of the environmental/pollution insurance marketplace in the face of daunting conditions. Why this growth has occurred, and what it means to an agency, are important to understand. The performance of this niche clearly illustrates the efforts being made to find success in our evolving market, and agents that can correctly tap into it will see significant return on their investment.

In 1990, four companies offered dedicated environmental insurance products. In 2000 there were closer to 10. At the end of 2010, there were at least 40 companies with environmental practices. One thousand percent growth over 20 years is significant, but even more significant is the growth in the last 3 years, from 20 to 40. Companies including XL (formerly ECS), Chartis (formerly AIG), Zurich, Markel, Liberty, Chubb and others have been involved almost from the beginning. In the face of the most difficult market most can remember, why has environmental been such a draw for carriers? And what does this explosive growth mean for the insurance agent?
At the root of the growth in environmental carriers is the underlying shift in how insurance works. Carriers have long underwritten to very small profit goals, recognizing investment income as the true driver of their profitability for their investors. Equity market returns of 10 percent or greater were the norm for many years. Carriers generated premium, reserved conservatively, putting that money into IBNR, and saw the investment income profits role in. This model served our industry very well for many years and through many market cycles.

Unfortunately, this underlying dynamic has changed. The investment market is no longer able to return such generous results to its investors, and this is in turn is forcing companies to find their profits elsewhere. The only viable solution is to try to underwrite accounts more profitably than before.

While this seems like a simple task, it is anything but. Due to the difficult economic environment over the last 3 years, the insurance industry is struggling to write as much premium as in the past, not to mention at a greater profit. As whole sections of the economy lose value, the insurers that cover them generate less in premium. With current unemployment figures hovering at just under 10 percent, the industry that rates based on payroll has taken a real hit. Adding to this the anemic overall growth of the economy, and you end up with carriers fighting for more slices of a shrunken pie.

Add to this the reduction of loss reserves at many companies. Carriers traditionally bring reserves down as prior year results have allowed, dropping those dollars right to their bottom lines. Unfortunately, given the lack of investment returns, they are no longer filling that reserve pool back up as aggressively as they once did. The money that eventually came out and bolstered the bottom line is rapidly going away. If a company can maintain strong underwriting profitability, this is not a huge problem. If, however, carriers have to fight for business and write risks for less than they want to, this can quickly become a significant long term issue.

The final piece of the puzzle is the dramatic influx of capital into the industry as a whole. While the insurance industry has been struggling, the promise of a decent enough return excites investors into the marketplace, especially compared with the return the equity markets have yielded. Over the last 5 years there has been a steady influx of money into the insurance industry, all of it seeking a home and a respectable ROI.

So how does this all lead to an increase in environmental programs over the last several years? The answer is simple. When environmental business was first written in the late ‘70s and early ‘80s, carriers had no idea how to price it. Coming off of horrific asbestos-related claims, carriers were very cautious in how they priced these products. Over the intervening 30 years, it has been shown that environmental exposures are not significantly more challenging than many other casualty lines. While there are of course exceptions in certain areas, the general consensus is that environmental risks are more profitable than many other mature market segments.

This is where things get interesting. While this may be true, it is by no means universally true. Over the last 10 years carriers have blended coverages to sell under the heading “environmental.” Many of these combine CGL and products with site or contractors pollution. While the environmental component of the package may in fact be profitable, there is ample evidence that casualty business is, and will always be, casualty business. If you write tough products, you are going to have some real claims. If you write a combined CGL and contractors pollution policy for a tank installation contractor, you are more likely to see claims from people falling into holes than you are from pollution. So while “environmental” insurance has proven itself to be very profitable over the last 30 years, it is mutating into something different where the genes of its more standard components may well be dominating the results.

Another challenge is the people. Environmental insurance has had a very short and squat pyramid; broad base but not much room at the top. Over the last 10 years many talented men and women have risen in the ranks of environmental insurers. Many of them have been looking for the next step into senior management. Heading an environmental unit is often the crown jewel of someone’s career. Many of these people are looking hard for the opportunity to jump their careers to the next level, and are aggressively reaching out to carriers without an environmental unit to try to create the job they seek. All of the above pieces have lined up over the last several years. We have an influx of capital, we have carriers looking for ways to write more business more profitably, we have a market segment with a history of profitability and we have people willing to lead these new divisions. Given all of the above, it’s a wonder we don’t have even more markets focusing on environmental accounts.

What does this mean for an agent? Many may think choice is a good thing, and in many respects it is. Environmental insurance is a class of business where individual underwriter appetite often dictates what a carrier will write, or at least will try to write aggressively. Having only one or two relationships leaves an agent at the mercy of one or two individuals. If, on the other hand, an agent can go to 40 different markets, he or she should never have to worry about any single underwriter blocking the path to success.

While on the surface this makes some sense, it is a very dangerous path for an agent to follow for a few reasons. The characteristics of a good carrier relationship differ for many agencies, but in general they include carrier stability and commitment to the line, underwriter knowledge and responsiveness, solid claims handling system and track record and proven service capabilities. All of these components add up to not only success writing an account, but long-term success in servicing and maintaining the business. Compounding growth only comes through happy insureds renewing year after year. If claims are not being paid and endorsements not delivered, it makes every renewal a fight instead of an affirmation.

Determine your Partners
The environmental marketplace has grown quickly, and the development of many programs has been somewhat mixed. There are surface indications that agents can review to determine if a market will be a good partner for them.

The first is the commitment carriers have made to environmental insurance. Are they in this for the long haul or are they simply trying to write some quick business? A gauge of this commitment is their staffing situations. How many employees have they hired? How many offices or locations do they have? Are they making enough of a commitment for an agent to know that they can adequately service the business they are writing, and that they are in it for the long run? We have seen markets enter this arena recently with two or three employees, and we have seen others enter with 15. Clearly one is making a bigger commitment than the other.

A similar issue is the claims handing staff. Has it hired at least a few key claims people to handle environmental claims? Environmental claims are not the same as regular casualty claims, and people with experience in this area are critical for long term success of a program.

The final key component is management and underwriting staffing. Is the person the insurer hired to put the program together an experienced environmental and insurance professional? A senior underwriter making the move to management can be fraught with problems, as the management role is so complex. Does the person coming on board have the background to be successful? Also, who has been hired as underwriters? Do they have experience and credibility in the marketplace? Again, seasoned experienced underwriters and a structure to enable them to succeed are very important.

Agents need to partner with companies that are committed to the line of business. A company that hopes to be doing this in 10 years is far more likely to responsibly deal with the issues that will inevitably come up than one who is in it for short term premium volume. While the above do not guarantee commitment, they certainly indicate it.

Once an agent is satisfied with this, the next important component is reviewing and understanding the coverage being offered. No two environmental policies are the same, and there is huge diversity in the type of coverage being offered. Knowing what you’re offering the client is crucial, certainly as crucial as knowing the carrier you are offering it from.

Given the above, an agent may find that the best way to access environmental carriers is to go through a specialty broker. In the current marketplace these brokers typically pay the same commissions that direct carriers would, and give the added advantage of having done a lot of the above leg work for the agent. The same criteria need to be utilized to make this selection as was used for the carrier review. Longevity, commitment, expertise, reputation are all import and easily judged items. Spending a few moments researching the web and talking to other agents and carriers can bring you excellent choices for partners.

The environmental market is still growing fast. One of the positive offshoots of so much competition is a huge increase in marketing. All of these carriers, and the many brokers focusing on the line of business, are marketing the coverage. This is leading to an increased awareness at all levels. More job specs are requiring pollution coverage, as are landlords, lenders and attorneys. This increase in exposure is a definite plus for agents seeking new coverages to offer their clients.

Last year’s BP oil spill has been yet another driver of increased interest. Many of the business impacted by the spill, from coastal property owners to people making their livings along the Gulf Coast, could have been protected by the right environmental coverage. Many businesses have learned from this situation, and other lesser-known ones in their own back yards, and are reaching out to their agents to discuss what coverage is available to them. Most insureds can talk about a similar business or an associate they know that has had an environmental issue come up. This increases the population buying these products from hundreds in the early days to hundreds of thousands today.

The evolving insurance industry has challenged many but has also created opportunities unlike any seen before. Agents wield a great deal of power in this market, being the gate keepers to their clients. With so many agents and carriers scrambling to find business, and in some cases willing to do almost anything for it, the potential fallout is huge. Inadequate coverage, carriers gone after a year or two, and similar problems will force many agencies and carriers to the sidelines. Those that take time to consider the choices they are making, and the long term ramifications of them, will rise above their competition. This is already beginning to happen, as some are seeing significant growth in new business and strong renewal retention while others are falling fast. As the economy continues to improve, and with it the equity markets, the frenzy of the last few years will fade, and competence and professionalism will prevail. A solid environmental strategy is only one component, albeit an important one, of the thoughtful agencies’ strategy to continue to succeed in our new marketplace.

Some of the companies that see an increase of activity in winter months include:

• HVAC Contractors – Maintenance for heating units
• Plumbers – Fixing frozen pipes and busted water heaters
• Auto Repair and Vehicle Maintenance Facilities
• Heating and Oil Contractors
• Chimney Sweeps/Maintenance Contractors
• Snow Removal/Street & Road Contractors

Make sure your clients aren’t “left out in the cold” this winter; call them today to make sure they have the right coverage for their operations.

The rapid growth has forced self storage owners and managers to protect their premises from the increased activity that these sites have experienced. One of the main ways they can do this is by having a solid pollution liability insurance policy to cover themselves against potential problems that could occur from environmental exposures.

Self storage owners and managers should consider securing a Site Specific Pollution Liability policy, which will provide coverage for supervised and unsupervised self storage facilities throughout the U.S. Coverage can include: third party liability for bodily injury and property damage claims, first party cleanup costs, and defense costs; Transportation Pollution Liability coverage for waste hauled by the insured or contracted carriers; off-site coverage for non-owned waste disposal sites; automatic Extended Reporting Period (ERP) with optional ERP of up to three years; and an optional Mold enhancement.

Claims caused by a pollution condition may not be covered via the insured’s General Liability or Property form, so it is important for these organizations to purchase more protection. Coverage can be tailored specifically for self storage facilities and their exposures, such as abandoned, potentially hazardous materials, as well as mold.

What Potential Exposures Does a Self Storage Facility Have?

• Abandoned hazardous waste
• Midnight dumping
• Mold
• Hazardous runoff during rain events.
• The accumulation of petroleum hydrocarbons in the soil.
• Misuse of self storage spaces involving activities unknown to the facility owner or manager.
• And many other exposures…

Many self storage facilities are affiliated with various associations dedicated to educating members about the challenges present in this type of operation. Some of them also provide information to members of the self storage facility industry on regulations and insurance recommendations made to these professionals. Now is a great opportunity to reach out to your self storage facility clients to make sure they have the most effective coverage in place.

* National Self Storage Association Website

The ongoing issues with insureds’ contract requirements force insurance professionals to push the envelope each and every day. Trying to keep up with a client’s needs can take a great deal of effort, and with pollution coverage becoming a very real issue for most business owners and operators, it is important to understand the differences in coverage forms. One major point to focus on is the important differences between Sudden & Accidental and Broad Form Contractors Pollution Liability.

Over the past twenty years, the insurance industry has provided Sudden & Accidental Pollution coverage to a variety of business classes. This coverage was meant to satisfy certificate holders and property owners that were concerned with the potential for a pollution loss. Sudden & Accidental coverage is tied to a discovery and reporting period, and generally covers bodily injury and property damage caused by a pollution loss. The main issue with this fact is that if the loss happens over time or is not discovered or reported in the time allowed under the policy form, there is no coverage in place. Also, these forms tend to not have completed operations, action over, or clean up costs included.

Over the last decade, we have all seen companies that have started to provide broad form Contractors Pollution Liability coverage to many of these same industries. The Contractors Pollution Liability form covers bodily injury, property damage, and clean up expenses. Most of these forms also include completed operations and action over coverage, allowing for a much broader policy and giving real coverage to the insureds and their certificate holders. These policies can be written on both a claims-made or occurrence basis and the discovery and reporting period are tied to the policy term.

With the EPA continually growing and issues like the BP offshore incident, your insureds have a greater need to protect themselves from Pollution exposures and threats. Property owners, contract holders, and certificate requests are going to continue to ask for Pollution coverage and higher limits with broader terms. This is going to put more pressure on insurance agents to provide for these needs and to make sure the gaps in their clients’ insurance programs are covered. This can be done with a simple standalone Contractors Pollution Liability policy that can also include Products Pollution Liability, Transportation Pollution Liability, and some Site Specific coverage.

Always remember that when your insured is on a third party’s site they are exposed to environmental risks, they may not generate. We cannot anticipate who an insured will work for or what conditions they may be dealing with in their daily operations. Accidents can happen and with one simple insurance policy, you can remove the worry over the total or absolute pollution exclusion on the Commercial General Liability policy. We have to remember that thinking outside the box and providing expertise are the main reasons the insured pays his or her insurance agent. In order to protect both the client and the agent’s organization, it is crucial to be educated on environmental exposures and the forms that address them.

We recently worked with an agent representing a company who specializes in the process design, engineering, and supply of solvent recovery systems, scrubbers, and fans. The company also manages the design and engineering of synthetic resin manufacturing plants. This year at renewal, they were seeking a combined General Liability/Contractors Pollution Liability/Professional policy and a separate Follow-Form Excess policy, to renew on August 1st. The expiring receipts were $2.5M and the insured was projecting $3M for the upcoming fiscal year. However, they were also awarded a large job in Italy that was expected to generate an additional $15M in receipts (for a total of $18M).

Unfortunately, the large amount of foreign work did not fit the underwriting guidelines for the incumbent carrier. They were able to offer renewal terms based on the $3M in projected receipts for work that would be done in the United States, but would not be able to cover the $15M project in Italy and would have to add an exclusion to the policy for this job. After speaking with a few other markets, we were able to find a carrier that could add a worldwide coverage endorsement and write a policy that included this job, based on $18M in projected receipts.

The insured bound coverage with the new carrier; since the project does not start for a few months, the carrier provided an additional premium, which is good for 60 days. When all details are finalized in the project contract, the insured will provide the official start date and the carrier will endorse both policies to increase the amount of projected receipts to include this project and charge the additional premium. The carrier also agreed to increase the Excess limits when the project begins to comply with the limit requirements for the job.

The premium breakdown is as follows:

• General Liability/Contractors Pollution Liability/Professional policy with $2M/$2M limits.
  - $10,000 deductible
  - Worldwide Coverage Endorsement
  - Based on $3M in projected receipts = $41,798 in premium

• Additional premium to add the Italy job and increased projected receipts to $18M = $93,760.

• Follow-Form Excess with a $1M limit = $5,293.

• Additional premium to add Italy job, increase the projected receipts on the primary policy to $18M and increase Excess limits to $2M to comply with contract requirements = $25,368.

This is another example of an account that may not be a fit with one carrier, but may be perfect for another. It is important to work with a wholesale broker that knows the available markets, especially for a challenging account, or one that has “grown out of” its current carrier. This particular underwriter’s flexibility and knowledge of the overall risk ultimately won them the account and allowed the insured to comply with the insurance requirements for an extremely large and unique project. We were able to meet the insured’s immediate needs by renewing coverage based on the jobs they currently have and plan for growth with the upcoming job.

For more information on the products we offer, feel free to call us at 1-800-596-2156 or email us.

In today’s competitive insurance industry and struggling economy, agents are hard pressed to sell anything more than the bare coverage necessities. But while this challenge may seem daunting, it is not without significant rewards. Increased revenue, stronger client relationships, and peace of mind are just a few. Given the pressures many agencies are currently feeling, certain additional coverages are an opportunity to grow in this soft market.

Many insureds have exposures that are broader than the coverage they carry. While this is not the easiest thing for agents to talk with their clients about, it is a crucial discussion nonetheless. With all of the other difficulties a business faces, inadequate coverage is not acceptable in the face of a significant claim. No agent wants to be on the wrong side of that conversation should it happen to their client.

One such exposure is posed by the pollution exclusion in the CGL policy. Virtually every business has some degree of environmental exposure, given the very broad definition of a pollutant that is addressed by that exclusion. Most airborne irritants fit the definition, leading to a wide range of possible coverage gaps.

Clearly, this is a coverage every insured should know about. It is important for an agent to recognize the value of this product—in many respects, what makes this a good product for the agent also makes it a good choice for the insured.

Agents are presented with many ancillary exposures and coverages to consider with their clients. Typically they cannot all be addressed. Given this, an agent needs to choose which coverages to provide terms on, and which to briefly discuss and let go. For an agent, there are two key considerations when deciding this. The first is that there is an exposure that is not addressed by the insured’s current insurance program. The next is that coverage is available from quality carriers, is effective, and is affordable. A positive response to these questions means an agent should offer the coverage, as failing to do so would put an agency in an untenable position in the event of a loss.

Once the choice to focus on environmental coverage has been made, the attention can then turn to the advantages to offering it. Luckily there are many.

First and foremost, offering broader coverage to a client helps demonstrate an agency’s professionalism. A firm that understands the complex needs of their clients in relation to the structure of the policies they offer is clearly seen as a more professional, experienced, and valuable agency partner. Knowing the coverage and having the tough conversations about it is what distinguishes agencies from each other. Environmental insurance is an excellent opportunity to do just that.

Similarly, insureds who carry environmental coverage are in a position to use that to differentiate themselves from their competitors. Advising potential clients of the scope of this coverage, and the added security it provides, gives them a competitive edge. Contracts calling for pollution coverage are easily met, allowing insureds to present themselves as prepared and professional.

In addition to the advantages gained through enhanced stature, pollution coverage gives both parties peace of mind. For the agent this comes from knowing that a client’s significant coverage gap has been addressed. Regardless of how thorough an agent has been in having the client disclaim coverage offered, it is always better to have the coverage in force than to have to worry about a potential problem down the road. In a world where coverage that is missing from an insured’s policy is found in the agency’s errors and omissions policy, having a client purchase the proper insurance is more than just a good idea.

For an insured, a similar peace of mind exists. As every business owner knows, walking the tightrope of coverage versus exposure can be stressful. Insurance is a powerful risk management tool and is a key component of every insured’s management plan. Deciding which risks to retain, and which to transfer, has to be based on a complete knowledge and understanding of the actual risk. Once the environmental exposures are explained to the insured, the decision to purchase coverage becomes a clear choice between retention and transfer. Deciding to purchase broader coverage and transfer the risk puts yet another business threat in the category of transferred, and allows the insured to focus their concerns elsewhere.

There are financial incentives for both the agent and insured in the purchase of environmental coverage as well. As with the exposures, having a clear picture of the benefits to both parties is crucial to the decision-making process. For an agent, there is of course an actual cost to generate this class of business. Marketing to carriers, brokers, MGAs and other market sources can be time consuming and difficult. Many carriers require separate appointments for environmental coverage, and require their own unique application as well.

Luckily, there are several ways to access the market in an efficient way that also increases the likelihood of receiving a high quality program designed specifically for the insured. There are a few highly skilled, experienced specialty brokers that can give a retail agent access to the top carriers in the business, offering very broad coverages. Many of these brokers are well known for their product knowledge, and give the agent the tools needed to explain both the exposures and the coverages to the client. The right specialty broker can add significant value to the agent’s process, increasing the odds of writing the account at the lowest possible cost in a reasonable timeframe for the agency.

Once effective coverage from a quality carrier has been found, the revenue it provides to the agency is a welcome addition in a difficult year. Commissions range from modest to excellent, depending on the source accessed. Regardless, the agent needs to keep in mind the value of linking another policy to the chain for that client. The more coverage they have in force for an insured, the harder it will be for a competitor to replicate the program or threaten the relationship at renewal.

As with the coverage considerations, the cost benefit analysis for the insured is a positive one as well. While the additional premium may not be something they initially plan on, given the softening market, it is unlikely that adding the coverage this year would push them above their expiring costs. Balanced against this is the additional business they can attract with the coverage, as well as the protection against unplanned environmental loss. Many insureds highlight this specific coverage in their marketing and SOQ materials. By recognizing the reasons why coverage is beneficial to the insured, agents are able to take this higher standard of security—for themselves and their clients—and turn it into revenue-generating opportunities.

Given the challenges of the economic climate in which businesses are currently functioning, there are many reasons why agents and their insureds should carefully consider environmental coverages. The downside of cost and effort is certainly offset by the opportunity to bring in more business. These benefits are shared equally between the agent and client, which create a unique and valuable synergy.