Insurance Academy

4 Thoughts About THREE

By Patrick Wraight | May 8, 2019

I’ve held off commenting very much on THREE, the new three-page commercial policy by Berkshire Hathaway. It’s time for a few of my thoughts.

It has only been filed in a limited number of states.

So far, THREE has been filed in four states. This makes total sense because state filings can be hard, time consuming, and expensive. It also makes sense where they’ve filed so far. THREE has only been filed in Connecticut, Illinois, Nebraska, and Texas. Again, this makes some sense because these states tend to be a little easier than other states from a regulatory stand point.

It is worth noting that in at least one state, they were able to file their rates, rules, and forms on a file and use basis. This is a simplified form of regulation that is very friendly for the insurance company. Simply, the insured is allowed to use the rates, rules, and forms as soon as they file them with the state. The state then has a limited amount of time to respond to the filing. They could reject the filing, nullifying it. They could request clarification, documenting it. They could reject parts of it, requiring the company to amend it.

A limited number of states also allows the company to ramp up their back-office underwriting, processing, and issuing of these policies. It takes time to build the internal support system for an insurance program. Again, a wise move.

Filing for the policies in a limited number of states and not telling us which states they are is a great marketing move. If an insured is interested in the policy, they have to search their zip code, find out that they aren’t able to get the policy, and then provide an email for marketing contacts within the company.

It’s not going to be three pages in most states (but it will still be short, kind of).

So far, 3 of 4 states have required the company to file a state specific supplement. These supplements provide some coverage clarifications, broadened coverage, and consumer notices so far. In fact, in two of the states, the supplement adds uninsured/underinsured motorists’ coverage to the policies and the supplements call that expanded coverage.

Pro tip: Watch what the state regulators require to find out where the holes in coverage might be.

Speaking of holes in coverage, one supplement adds this paragraph.

Use of Reasonable Force in Defense: The policy’s exclusion for damage or occurrences that were expected or intended does not apply to the use of reasonable force used in defense of people or property. This expands coverage available under the policy.

That’s right. In their attempt to shorten and simplify their policy, they shortened the expected or intended injury exclusion so that any expected or intended injury is not covered. This is narrower coverage than a standard ISO Commercial General Liability policy and it was only corrected in one state so far.

Can we really call it a three-page policy when they include workers’ compensation as a coverage, but punt the policy language? Here’s what it says about workers’ compensation in the policy.

Workers’ compensation insurance: Every state has workers’ compensation laws that provide benefits for injured employees. We cover your business for and will promptly pay amounts required by state workers’ compensation law. We will pay all installments of the compensation that may be awarded or agreed upon in connection with those injuries.

In short language, “We didn’t want to add real policy language about workers’ compensation. Go read your state’s laws.” So, is it really simplifying things? Now the insured doesn’t need an insurance agent to help them with their workers’ compensation. They need a workers’ compensation attorney. Is that simpler?

It doesn’t tell you who is covered.

Let me quote a few more lines.

This policy only covers your business for loss caused by occurrences during the policy period.

When listed Additional Insureds or employees of your business act on its behalf, they are also covered.

The business itself is insured. We get that, but what about employees? Does that sentence from the liability paragraph mean that “listed Additional Insureds” or “employees” are covered? Or does it mean “listed Additional Insureds” or “listed employees” are covered? I’m going to guess that they mean for employees to be covered, but I’m not sure.

If they meant to cover employees, that’s great. If they didn’t any court that has to adjudicate a dispute will likely find that ambiguous and rule against the company.

It is a positive step.

I’m not opposed to making insurance policies simpler to read. It would be great if customers understood what they were buying. I’m not a huge fan of how we’ve changed policies over the last 30-40 years. Most insurance policies have been written by committees of people, over a long period of time, and without a single, unifying plan behind them.

What if a person decided that they wanted a house for one person? She builds the house that she needs and she’s happy. That is, until she discovers that she needs more space. She buys a shed to store her musical equipment. Then she decides that she doesn’t want to walk outside to get her guitar and the humidity is bad for the drums, so she builds a hallway to the shed.

Then she adopts three cats, two dogs, and invites her brother and his family to move in. She builds a second floor with an outside staircase to get to it. Eventually, she decides she doesn’t want to go outside to get upstairs, especially since her brother and family moved out.

That’s kind of how insurance policies feel sometimes. There is language that everyone accepts, but no one really knows why it’s there. There are words that aren’t used anywhere in the cultural lexicon, but they show up in the insurance policy. We all have cell phones, but how many of us have pewterware? Right.

We won’t know how viable this product is until they sell a few thousand policies and settle some difficult claims. Until then. I’ll plan to be skeptically optimistic that a simpler solution to insurance policy language can exist.

About Patrick Wraight

Patrick Wraight, CIC, CRM, AU, is director of Insurance Journal's Academy of Insurance. He can be reached at

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