Nobody Ever Got Fired For Buying Too Much Insurance

I’m finally finished with my July renewals.  I am beaten and bloody but we, in general, came out on top.  Ugg!

I had several instances where bankers were buying more insurance than I thought necessary based on the size, structure, and financial strength of the bank. I almost always get pushback on a recommendation to reduce coverage (or to drop a policy altogether).

I understand why an insurance agent might be reluctant to reduce coverage. Commissions to agents go down when premiums go down. Also, and perhaps an even stronger reason, is the fear of the threat of lawsuits. It has never occurred to many insurance agents that there is any such thing as too much insurance. They will certainly not say it out loud!

The more interesting (to me) phenomena is insurance buyer’s reluctance to reduce coverage.

Recently a bank had $6,000,000 in liability coverage. My recommended limit of coverage was $2,000,000. The premium savings was $12,000 which would have paid for the increase in coverage I was recommending someplace else.  Basically I was saying, “You don’t need that much here, but buy more there.”

The bank’s decision was to keep the $6,000,000 and buy the extra coverage too.

Versions of this scenario were repeated several times in the July renewal process.

My approach has long been to present info. I give my best advice based on my perception of the best interest of my clients. The bank leadership then decides based on their perception of the value of the insurance.

The strange thing is (to me) that the perception of value almost never involves less insurance.

A client helped me understand it recently when he said, “Nobody ever got fired for buying too much insurance.”

That is probably true.