Survey Reveals P&C Missing In Financial Planning Process

A survey released this week at the annual conference of the International Association for Financial Planning (IAFP) found that more than 80 percent of financial planners see it as their responsibility to help clients protect their assets through property and casualty insurance. However, almost 60 percent of planners do not review such financial protection with clients on a regular basis—if at all.

The survey, conducted by PLI Brokerage, Inc., a Chubb Corporation property and casualty insurance agency, also found that two-thirds of planners (67 percent) do not address property/casualty insurance within their own organizations. Rather, they refer their clients to outside firms.

"These findings should raise some concerns for financial planners, particularly in light of studies showing that many people are severely underinsured. For example, one recent study found that 67 percent of American homes are underinsured by an average of 35 percent," said John Paolini, PLI's financial services manager.

"A client's insurance coverage should be evaluated on at least an annual basis to make sure that it reflects a client's changing net worth and possessions," he continued. "Furthermore, while most planners are not licensed to sell property/casualty insurance products, they may be limiting their role when they totally disengage themselves from the property/casualty insurance planning process."

Other key survey findings include:

• When planners do address property and casualty insurance needs, 57 percent do so mainly out of the value such service provides their clients, including the ability to solidify a comprehensive financial plan. This is in stark contrast to 26 percent whose property and casualty involvement is primarily motivated by the potential to generate additional income or client referrals.
• Forty-six percent of planners think it is most important that their clients purchase adequate coverage for loss or damage to their personal property, such as homes, autos, fine arts and other valuables and possessions. Only 27 percent think it is more important that a client's liability insurance limits be directly related to net worth.

"This is surprising," said Paolini, "since in the past, many financial planners have told us that their clients typically can recover from a property loss, but not necessarily a severe liability loss. Perhaps, with all the news about natural disasters in recent years, planners feel that their clients are more likely to endure a catastrophic property loss than a lawsuit or serious liability claim."

The survey findings are based on a series of questions answered by 122 financial planners. On average, the respondents have more than 13 years of experience in the financial planning profession.

"PLI conducted the survey to help financial planners understand the value of property/casualty insurance in the planning process," said Paul Funk, a senior vice president at PLI. "Frankly, a single catastrophe can wipe out assets a client took years to build. While managing and building clients' assets is an integral part of the financial planning process, protecting assets through insurance is equally important," he said. "As the IAFP says in its new theme, 'Planning pays off'."

PLI develops most of its business through strategic partnerships with various organizations. Over the last decade, the company has developed long-term relationships with financial planners throughout the United States. In response to the growth within the financial planning community, PLI recently formed a unit dedicated to forging additional alliances with planners.