E&O Tips – Archive
Exposure Analysis Checklists – They're Not Just for Your Clients
At times you might think there is so much (or too much!) to learn in this business. Maybe, for example, you are a producer or CSR in an agency with a client who is a dry cleaner. You admit to yourself that you really don't understand the exposures of a dry cleaner. What do you do? A great starting point is to refer to the various Exposure Analysis Checklists which contain a tremendous amount of information broken down by class. Within each of these classes is a listing of the various coverages with explanations and definitions. What a great resource! Spend some time each week reviewing these; they will certainly help you become more knowledgeable. Thus, when you are dealing with customers, you will be more confident in your communication. Plus, when dealing with your companies, these checklists will help you determine the correct GL and WC codes. This makes your applications that much more credible to your underwriters and will help those apps get to the top of the pile. There is a lot to learn in this industry – and using Exposure Analysis Checklists is an extremely effective way to do so. Utica National offers exceptional discounts with companies such as Rough Notes for programs to empower your agency to out-perform your competitors while reducing Errors and Omissions exposure.
Cross-Selling in Personal Lines: Reduce Your E&O Exposure by Increasing Revenue
It's probably fair to say that for every one of your personal lines accounts, there is another sales opportunity waiting to be explored. The key is to use your agency management system to help you. Can you identify the accounts where you write the auto and the HO, but no umbrella? What about the ability to expand the HO coverage via a Home Business Endorsement or by identifying a collectible that is not properly insured? Does your customer possibly have a boat that is insured elsewhere? Personal lines accounts have tremendous potential for identifying exposures not protected through your agency. Develop a list of personal lines exposures/needs analysis, and then merge it with a letter from your agency system to send out. Did you know that less than 25% of women's diamond rings are insured? There's a sales opportunity right there! Communicating with and educating your customers places some degree of responsibility on them to advise you if they desire certain coverages.
Dealing with Your Clients' Divorce – A Potential E&O Nightmare!
Separation/divorce scenarios can and have caused E&O claims. If you are aware that you have clients going through a separation/divorce, this should be handled with tremendous attention to detail and solid communication. Coverage under various personal lines policies (auto, homeowners, umbrella, etc.) is based on the named insured and the residence. As a result, changes in the living arrangement can reduce/eliminate coverage. The key is communication with both parties. Look to arrange coverage for both individuals equal to what they had under one policy. Anything less than that should be explained, understood and agreed upon. Letters should be sent to each informing them of the action taken by the agency and inviting questions or further changes that may be needed. Sometimes you will not know if there are marital changes and may need to ask if you suspect something significant is happening.
Certificates of Insurance – What Could Possibly Go Wrong?
Over the last couple of years, E&O claims involving the handling of certificates of insurance have been on the rise. While most realize what a certificate is, it is equally important to realize what a certificate is not. It is not a policy of insurance. It is not a contract. It does not amend, extend or alter the coverage afforded by the actual policies. It is imperative to verify whether the policy for which the Certificate of Insurance is being issued is currently in-force. Moreover, a certificate should not be issued with broader coverage than the policy. If there is a need to provide broader coverage, such as adding an entity as an additional insured, check with the company first to make sure they will approve the endorsement request...and be sure to get this approval in writing! If the certificate requires the listing of an E&S company where you are technically not the agent of record (the wholesaler is), contact the wholesaler for their approval or request that they issue the certificate. Many agencies assign specific staff to the issuance of certificates to avoid any problems, which is a preferred practice.
Using Temps to Handle a Vacant Position? There's Something You Need to Know.
Certainly from time to time, a position in your agency becomes vacant. Presuming this is for a short period, agencies often reach out to local staffing agencies to fill these posts. Most likely, a temporary worker is technically not considered an employee as you are paying the temp agency directly. In addition, because insurance agencies are especially known for "giving back to the community," hiring high school or college kids during the summer is all too common. Are they considered an employee? Well, in both of these situations there is certainly the possibility that these persons could cause an error. If they do, are you positive that your E&O provides coverage? If only employees are covered, this could be a sticky situation. Check the "Who is an Insured?" definition of your E&O policy to be certain. For Utica customers, there's no need to check as leased/temp staff are automatically covered.
Performance Reviews - How Often are You Providing this Key Feedback?
The goals of each agency are to grow and be successful. Since agencies are made up of people, providing them with feedback and training will enable them to grow, which in turn benefits the agency. Conduct an annual performance review of each of your staff members, addressing their various technical skills (software and insurance coverages) as well as their sales and customer service skill levels. Meet with every staff member...it takes time, but the benefits are huge! Plus, their merit raises should be based on performance. Also include an educational objective. Consider having the staff begin a course of study or attend a seminar or two. Cross-training is also a great objective that will benefit the agency. Education translates into knowledge. When your staff knows the product they are handling, they will position your agency as a professional shop with quality people.
How Loud are Your Customers Complaining?
How well are you listening to your customers? Let's face it...we are human beings and thus not perfect. A great way to find out your agency's shortcomings is to listen to your customers: what they like about the agency and what they don't. An annual survey is a great approach. From time to time, you are going to have a customer that is not happy. That's not necessarily a bad thing provided that you listen to their issue. An unhappy customer should receive immediate attention to resolve the issue before it gets worse. Develop a documented procedure for advising management of customer complaints. Then, through a thorough, extensive investigation, determine what – if anything – went wrong and how to fix it. There are E&O claims that started with an unhappy customer who was ignored. Listening intently to your customers can have significant positive benefits and might even save you from an E&O claim!
Customers that Pay at the Last Minute - What Could Possibly Go Wrong?
There is a strong possibility that whether you write Personal Lines or Commercial Lines, you have some direct-bill customers that pay at the very last minute. You might even have some customers that stop at your agency to pay after the policy has been cancelled. Any time you have a customer that comes in to make payments, the staff (receptionists, CSRs, etc.) must check the policy status before accepting payment. Some agencies have taken a position of not accepting the premium when it is right near the due date – instead giving the customer an envelope for that company and advising them to send in the premium themselves. You might also have a situation where a customer is looking to delete certain coverages right around the premium due date and looks for you to recalculate the premium due. The best approach is to advise them to pay the correct amount due and note that any overpayment will be credited toward their next installment.
Are There Mistakes in Your Files?
That's a good question to ask the staff at your next staff meeting. Of course, the answer is "yes." If you knew which file it was, you would undoubtedly fix it. The problem is that you don't know which file it is and probably won't know until that customer has a loss not fully covered and then alleges that your agency erred by providing insufficient coverage. This prompts the need for the agency to have standards/expectations for handling its customers. Of the many areas that can be addressed, probably none is more critical than documentation. The issue might be phone calls (including cell phones), requests for coverage modifications, declination of proposed coverages, etc. If you don't have a document that clearly spells out the expectations, develop one. And review it in detail with the staff. Without such a document, you are leaving it up to each staff member – and that has danger written all over it.
E&S - an E&O Minefield
There is no doubt that writing business in the E&S industry through wholesalers is a common, everyday practice and probably always will be. It is critical that your agency understands that this segment of the business is more than just a little different. There are a number of areas to consider. First, what are the binding guidelines of your wholesalers? Do they need money and the affidavits to bind coverage? Can you bind on Friday at 4 p.m. without money? It is important, too, to understand that E&S companies are not subject to conditional renewal notice requirements and thus the renewal of a GL policy (or any type of coverage) might look a lot different than the expiring policy. A review of the policies should be done to identify any differences and brought to the customer's attention. Your wholesaler should assist with this. E&S is a vital part of the industry – just be aware that it has uniqueness to it, so develop your procedures accordingly.
Agency Procedural Manual - Use It or Lose It
One of the goals of virtually any organization is consistency: in other words, doing it right. A procedural manual can be and often is a great tool to accomplish that objective. For it to be effective, though, it is important that this document be updated as needed, with the changes effectively communicated to the staff. A person/committee should be responsible for this to ensure accountability. Do you have a manual, but are unsure whether it's up to date or if the staff is really using it? You have two options: update it or throw it out! At the time of an E&O claim against your agency, this manual is subject to discovery by the plaintiff. Having a procedural manual not being adhered to by everyone will not bode well for you in the courtroom. For assistance in developing a manual, contact your state agent's association.
Sending a Cover Letter with the Policy: Is General Better than Specific?
This is actually a very common question. In many (probably most) states, there is a standard/expectation imposed on the client requiring them to read their policy. When sending a policy or policies to your customer, the best approach is to advise them that they should review the policy to ensure that it meets with their approval. If you were to include a cover letter that restated all of the coverages, the insured would no doubt rely on the cover letter and not read the policy. If coverages/limits were misstated, the insured would contend that they didn't need to read the policy since the agent told them what the coverages were. It's difficult to totally and accurately restate all of the coverages and thus the best approach is to be general. Request that the insured review their policy and then advise your agency if it does not appear correct or if there are any questions.
What Does Your Promotional Material Really Say About You?
There is no doubt you want to aggressively and effectively promote your agency. After all, it's a competitive marketplace out there! Remember, though, that how you promote your agency could come into play at the time of an E&O claim. For example, you might state "We are the experts" or "We make sure you are properly covered." Those are two statements that could come back to bite you as that is the standard that you have now created for your agency. At the time of an E&O claim, all of your promotional material –printed materials, Yellow Pages advertising, Web site, phone recording that plays when customers call and are put on hold, etc. – is subject to discovery by the plaintiff. They will contend they relied on that material and that is why they selected your agency for their insurance needs. Take a few minutes to review how you are promoting your agency...and make sure your materials are accurate and truthful.
Educate Your Customer
Before you entered the insurance business, how well did you understand your insurance coverages? Now you know how your customers probably feel. If you are not educating your customers on what's covered, what's not, what limitations there are, etc., now is a good time to start. Develop a printed newsletter to be mailed and/or dedicate a section of your Web site to education. While it is probably not possible to cover every detail, address the more important issues and those more appropriate based on the time of year. Encourage your customers to ask questions. Take a "frequently asked questions" approach to the topics your customers most often ask about. Look to your staff to be the contributing authors. They're sure to take great pride in their assignment and make you proud, too. Have the newsletter proofed by management before it goes out. Education – a great way to show your agency's professionalism and the value it provides.
Hold Periodic Staff Meetings - and Include an E&O Component
In the hectic world of corporate America (and probably in life, too!), open and honest communication is key to success. While at times there just aren't enough hours in the day, taking the time to meet with the staff can pay big dividends. Your people are your agency – and ensuring their success will ensure the success of your agency. Meet at least once every two weeks to discuss issues/changes in procedures, etc. It's beneficial, too, to include a discussion of items pertinent to E&O prevention...such as documentation, needs analysis, your E&S wholesalers and their procedures, file structure, review of coverages, etc. Set a time limit and stay within it. Maybe even bring in some food...that's always appreciated! Such meetings are a great way to ensure open communication and enhance staff morale.
Be Honest with Your Carriers
If asked, what would your carriers say about your agency? The hope, obviously, is that their comments would include such praises as "quality," "great staff," "complete submissions" and "true partners." It is extremely important to have an open and honest relationship with your carriers. That applies to the quality of your submissions to them as well. Your role is to provide them with the information they need to properly underwrite and price the risk. If that exposure includes a dog, a youthful operator, a wood-burning stove, etc., be sure your carriers know this upfront. There is no upside to misleading your carriers. If they find out your client has a dog when a claim occurs and you didn't advise them of this, it has tremendous negative implications. When an underwriter asks a question, don't presume that you know the answer; ask the client and get the right answer. So what would your carriers say about your agency? Might be good to ask.
Applications and the Importance of a Signature
Is there a big difference between an application with a signature and one without it? You bet! When an application is completed and the insured/prospect signs it, they are attesting to the accuracy of that information. If the app was completed (even with the insured present) and there is no signature, the insured/prospect probably will deny they gave you that information if a problem develops down the road. This puts your agency on the hook for a possible E&O claim. Plus, if the insured signed it and the information was not correct, in all likelihood your agency will not be responsible for the error. Exposures change...and getting updated applications with signatures is a great way to minimize your potential for an E&O claim. If submitting the application electronically, consider a procedure of getting a paper app signed for the file.
The Mirror Test: a Key Bullet
What exactly is the Mirror Test? When moving an account (Personal Lines or Commercial Lines) from Company A to Company B, the Mirror Test requires you to determine any differences in the coverages, bring them to the customer's attention and require the customer's sign off. Oftentimes, the companies can help you with this as they might have already completed the comparisons. If not, develop a spreadsheet of all the companies with which you are working. Review the coverage, the exclusions, the limits (including sub-limits) and the conditions. This way, you can advise your customer that if they are looking to save money they can do that, but will most likely give up some coverage. Failure to provide the proper coverage is – and has been – the #1 cause of claims. Performing the Mirror Test will take time, but it is a solid way to reduce your E&O exposure.
