A changing time
People must put together their own formula
Vicksburg native Preston Derivaux is a second-generation State Farm Insurance agent and has operated the Preston Derivaux Agency in Jackson since 1985. He recently sat down with the Mississippi Business Journal’s Nash Nunnery to discuss the insurance industry.
Q — How has the insurance industry changed since you became an agent in the mid-1980s?
A — Just as the lifestyles and needs of consumers have changed, so has our industry to help families manage risk, protect assets and make investments. Consumers have seen in most areas of the country that insurance companies, across most lines, have slashed prices and aggressively cut costs battling in today’s extremely competitive insurance market. Companies have reorganized and restructured to become more efficient in offering their products as economically as possible. Technology plays an important role, companies like State Farm have invested heavily in advanced, state-of-the-art computer systems to help customers evaluate their needs, track claims and expedite the process.
Overall, products have been updated, advertising has reached record levels, commissions have been reduced, and work forces have been trimmed. Some companies have even resorted to advertising their products with pitches that that tend to cheapen or commoditize the product.
The Internet has not changed the market as some predicted, because at the end of the day, our products are based on service – and the ability to meet customer needs on a direct, personal basis. Overall, agents and companies have embraced the new technology and use it as a tool to better service their clients.
The deregulation of the industry has seen the convergence of insurance, banks and security firms. Many companies are now offering clients the opportunity of one-stop-shopping where they can provide an array of financial services for their client’s entire financial needs.
The legal, regulatory and political environment has influenced how insurance companies operate. These external factors have added to the complexity of the cost of doing business.
Other issues that have had affected the industry since the mid-1980’s are terrorism, global warming and the increased exposure to huge mega-natural disasters.
Q — Is there such a thing as too much insurance coverage? What advice do you offer customers when planning their coverage?
A — There’s no set formula to determine how much insurance you need. How much insurance coverage you need is a subjective choice that needs to be discussed between you and your agent. Each situation is different. I do think that you can be insurance-poor. You have to have a balance between your exposure to loss and what you can afford.
The advice that I offer my customers is to sit down and do an insurance review to discuss their assets and their exposure to loss. When planning their coverage, I usually recommend high liability and high deductibles. I personally wouldn’t recommend insuring smaller less valuable items.
Q — How much liability insurance is appropriate?
A — The amount of liability insurance you select is a very important decision. This is critical in protecting your assets. If affordability is not an issue, then I recommend liability insurance that’s at least the value of your net worth. You have many decisions to make when planning your insurance coverage and there are several choices to reduce your insurance cost, but the liability coverage is not an area where you want to skimp. You want to be careful and make sure you have adequate coverage. This is a must. Inadequate liability insurance could expose you to financial ruin. Personal umbrella policies generally are quite affordable and provide a level of liability protection something a lot of people should consider.
Q — Is it necessary to purchase comprehensive insurance?
A — If your vehicle is financed then you are usually required by the lender to provide comprehensive coverage on your vehicle. Otherwise, the choice is yours. Most people have comprehensive coverage on more expensive, newer model vehicles. However, once the vehicle has depreciated to a low value, then you might want to consider removing that coverage as the repair costs from an incident might be more than the vehicle is worth. It’s about being smart and making an informed decision based on the potential loss.
Q — Besides a good driving record, are there ways for people to lower their insurance rates in poor economic times like these?
A — Absolutely. We encourage our clients to continually evaluate their coverage portfolio as there are many ways to reduce cost. A higher deductible is a very good way to reduce your rates. Deleting physical damage on older model cars if they are not financed. Defensive Driving Course Discount for drivers at least age 55, Driver Training Discount, Good Student Discount, Teen Safety Course Discount, Multi-Car Discount, Multi-Policy Discount and Passive Restraint/Air Bag Discount.
Q — Is it better to have a high insurance premium and low deductible or vice versa? And why?
A — If your budget allows it, I recommend a high deductible to reduce your premium. I’m a firm believer in high deductibles as long as you can afford to pay the deductible should a loss occur.
Q — What is a type of insurance consumers often forget to purchase?
A — This relates back to changes in our society and lifestyles – as people are living longer, I find that early enrollment to secure affordable long-term care insurance is probably the most over-looked insurance in my opinion.
Q – It’s been reported that millions of dollars per year are lost to insurance fraud, costing policyholders in the long run. What steps is the industry taking to prevent insurance fraud?
A – I think it is safe to say that the overall economic cost of insurance fraud is translated into higher prices for virtually all products, goods and services available today. Across the industry, we work closely with law enforcement. Many insurance companies have developed special investigative units to scrutinize dubious claims. Better trained claim representatives and enhanced coordination with law enforcement agencies have helped curb insurance fraud with more successful prosecutions. Education and public awareness are also good measures to prevent insurance fraud. The cost of insurance fraud is ultimately borne directly to consumers. It affects everything, not just the cost of purchasing insurance.
Q – Your late father, Jerry, built a highly successful insurance business in Vicksburg before retiring after 46 years. How much, if any, did he influence your decision to become an agent and what did you learn from him?
A – My father had a tremendous influence on my career. He was an outstanding role model from who I learned that integrity and fairness must be the foundation for everything we do. I grew up in the business so I was exposed to it all my life. It was something that I always wanted to do. It’s a very rewarding profession. There’s nothing like the sense of fulfillment when you deliver a claim check to a customer after they’ve experienced a potential financial crisis. Witnessing him taking care of his clients and delivering the promise motivated me to get my BBA degree in insurance and expanding that education with professional designations. He instilled a very strong work ethic. That’s what he was about – working hard and taking care of the customer.
Degree(s): BBA-insurance; Professional designations — CPCU, CLU, CIC, AU, LUTCF
Hobbies/interests: Fitness /spending time with family
Favorite restaurant: Keifer’s
Favorite movie: “Pursuit of Happyness”
Last book read: “Open: An Autobiography” (Andre Agassi)
Person who’s inspired you the most: My father
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