The design and administration of group personal liability programs as been perfected over the past few years. Such programs follow the basic premise of group insurance underwriting, meaning that participants in the group are connected in some way not related to their obtaining insurance.
For instance, they might be officers, partners or directors of a company, or else clients of a firm. Whatever the connection, the company—the sponsoring organization—can then offer personal excess, umbrella-liability insurance through a group buy.
A group personal liability program has the following advantages:
- Its pricing is below that of comparable coverage secured on an individual basis.
- Its higher liability limits as a group program make it more easily accessible to consumers.
- It may be subject to less individual participant underwriting.
Individual personal umbrella-liability policies are underwritten based on specific information, including household members’ occupations, motor vehicle records and the number of residences, vehicles and watercraft individuals own. Carriers also vary in how they conduct such underwriting on group programs.
In some cases, the group is underwritten—but not the individual participants. What’s important is that some carriers still need individual underwriting information as part of the group application process.
A group liability program specifically benefits individual participants. First, it enables the insurance broker to counsel each participant on the proper amount of liability coverage, an issue that in our opinion is broaderthan just the participant’s net worth.
Setting the right limit depends on many factors, so the insurance broker should evaluate each participant’s financial situation, risk tolerance and specific risks. The broker should also look at the probability that those risks will occur, the potential magnitude of loss and the extent to which underlying insurance policies would respond to the identified risks.
Still another consideration is how much premium each participant is willing to pay to mitigate exposure to the identified risks. We don’t believe that there’s always a direct correlation between judgment size and the amountof personal liability insurance the defendant carries. Indeed, the size of the judgment more closely correlates to the facts of the case, including the damages the plaintiff incurred due to the harmful conduct.
Another advantage is that implementing a group liability program is fairly simple: At the invitation of the sponsoring organization, a dedicated team conducts a review and forms an opinion of the participants’ personal insurance programs.
We’ve seen keen interest by wealth management firms in offering a group personal liability program to their clients.
A well-run wealth-management firm has a clearly defined client membership, making such a program attractive to underwriters. And, for the firm that implements such a program for clients, there’s the added value of tangible measurement of risk-management compliance.
Insurance services provided through NFP Property & Casualty Insurance, Inc., a subsidiary of NFP Corp. Doing business in California as NFP Property & Casualty Insurance Services, Inc. (Ca. License # 0F15715).
This article was originally published in the April/May 2016 issue of Worth.