Company’s new minimum wind and hail deductibles really blow
POSTAGE by Rob Stamp
We’ve spent a lot of time lately counseling customers who followed our recommendation to place their personal insurance business with AAA. Most of the conversations include a confession of sorts, wishing we hadn’t.
We facilitated many switches to AAA since we contracted with them a few years back. It’s a recognizable name with a long-standing local presence that penetrated the independent agency channel with highly-competitive premiums, especially when there were young drivers involved. From a personal standpoint, I thought it was pretty cool representing the same AAA my father worked for 50 years ago before helping establish Meadow Park Insurance Agency. He returned briefly to AAA in the ’70s in a high-pressure management role, but thought it was in his health’s best interest to move back to the agency for good. I’m glad he did. He’s 80 and still around. Not at the agency, of course, but still walking God’s green earth (nearly every single day).
It didn’t take long to realize dealing with AAA was going to be different. The auto policy was a little squirrelly when it came to coverage for unlisted drivers and AAA doesn’t waive the comprehensive deductible on windshield repairs the way our other carriers do. The underwriting requirements and documentation necessary to write homes older than me was a pain. AAA later told us we couldn’t write the home without supporting auto coverage, and also started requiring a AAA membership for all new insurance policyholders. If they didn’t maintain the membership, AAA could non-renew their policies. Imagine the umpire changing the rules every few innings. That’s what it felt like.
This year, AAA rolled out some major changes to its homeowners contract, instituting much higher wind and hail deductibles, limiting personal property earthquake coverage to $10,000 and pulling out refrigerated products spoilage coverage from the basic policy (and charging a separate premium for anyone wanting to keep it). The deductible change remains the biggest concern. Damage caused by wind or hail now became subject to a percentage deductible that was determined by the age of the roof. For roofs less than 15 years old, the deductible is 1 percent of whatever the dwelling is insured for. For older roofs, the deductible is 2 percent. So, on a home insured for $200,000 dwelling coverage, the homeowner’s share of a loss caused by wind or hail would be either $2,000 or $4,000, depending on the roof’s age.
Raising minimum deductibles seems to be a constant in this industry. When I started in the business 22 years ago, most folks carried a $250 deductible on their home. It went to $500, then wave after wave of major weather events pushed them upward from there. Separate, higher, wind/hail deductibles surfaced and now it’s not unusual to find company minimum deductibles at $1,000, $1,500 or higher. In its defense, AAA isn’t the only company doing it. It’s just the most severe in its approach. That 1- or 2-percent deductible adds up to quite a chunk of change for anyone living in anything more than a three-room bungalow. AAA also has some convoluted roof surfaces endorsement that even contains some schedule specifying the most it would pay for a damaged roof, again depending on age.
In April, Dean Wormer dropped the big one. That’s when AAA announced its planned withdrawal from the independent agency channel. In other words, the company is terminating agency contracts and will go back to selling and servicing AAA policies solely by its captive AAA agents. Since the agency owns the business, AAA must non-renew all its policies issued through independent agents like us. For most, that process begins to take place late next year as their policies expire. The company is required to follow strict non-renewal procedures and will formally notify customers of non-renewal. They’ve already made overtures to purchase the business from agents and you can bet that AAA will also make it easy to put customers wishing to stay with AAA in touch with a AAA representative who can assist in securing continuing coverage.
We’ve already re-marketed several accounts, mainly to avoid folks getting stuck with some outrageous homeowners deductible should Mother Nature take aim on their humble abode. We’ll continue to do so and offer alternative plans for those wishing to remain Meadow Park customers. I’m not naïve to think this won’t cause some disruption to our client base. Some people may insist on staying with AAA or use this opportunity to take their business elsewhere. I get that. A customer’s best interest has always been paramount and it will be no different now. What will be different is that my wife is no longer allowed to sing the AAA Insurance jingle in my presence.
I remind myself often this is not your father’s AAA. But then, on occasion, I actually believed that it probably was. And maybe that had something to do with him bailing out on it not once, but twice.