1. Watch your language. Using the wrong words can reduce your chances of a successful claim. For instance, if you find a metre of water in your basement and call to complain about the flood damage, your file will be closed on the spot. That’s because floods are seldom, if ever, covered under home policies. But complain about a sewer back-up and you may be successful. Other verbiage to avoid includes exaggerations, such as “I’m an awesome driver,” or imperative statements, such as “send me the money.” These, and other statements like it, alert insurance companies to a potential fraud.
2. I get a free trip if I sell you this policy. Insurance brokers earn their money from commissions they receive after selling you a policy. They also get incentives. Some insurance companies offer luxurious, all-inclusive trips to exotic locations to keep agent business. Other companies give Canadian Tire money as a bonus. If your agent is pushing you towards one policy, ask what incentive he may be getting.
3. I’m deep in debt. According to Greengrass Group, a research firm, 10% of agents have substantial debt. A good portion of this debt is from accumulated chargebacks—premiums paid back to insurance providers when policies are cancelled before the end of term. Get enough chargebacks and an agent may be tempted to find bigger premiums to earn bigger commissions.
4. I want you to switch policies. Agents earn 30% to 90% of your annual premium when they first sell you a policy. Each year you renew, however, the agent will only receive a 3% to 10% commission on your annual premium payment. If your agent pressures you to switch policies, he may be trying to earn another fat, first-year commission cheque.
5. You need to check my background. While the vast majority of insurance agents operate well within the confines of the law, a few bad apples can certainly spoil the bunch. To protect yourself, call your provincial insurance regulator to ask if your agent has been charged with any compliance breaches, such as fraud.