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Premium Audit – Errors & Omissions (E&O) Loss Prevention Tips

Posted By Administration, Tuesday, April 30, 2019

Your insureds don’t like surprises, especially when it comes to the topic of audits.  Without proper explanation and timely, adequate handling procedures, policies subject to audit can lead to surprises and E&O claims against your agency.

Your agency works long and hard to establish a relationship with a prospect. You learn about his or her business, analyze loss exposures, develop and present a comprehensive risk management plan, including insurance coverages, and win the case. Now it’s time to think about audits, as a number of policies are subject to audit.  

The following are some suggestions for your agency to ensure that your customer understands what it means to be audited and what he or she can expect.


  Identify which policies are subject to audit.

Determine why the policy is subject to audit, whereas some other policies are not.

Improper Workers Compensation class codes and territory issues are often discovered during an audit,  and can result in premium changes.

Check with the carrier prior to choosing classifications and developing premium.

Document your conversation. 


Notify your client in writing, on the proposal, that his or her exposure will be audited.

Explain the audit process and timing.

Clarify the difference between a physical audit, phone audit, and self-reporting audit.

Explain why the client’s premium can change from the initial proposal or policy premium. Talk to him or her  about how growth, previously unknown exposures, changes in operations, new products and/or operations, acquisitions, etc., can result in premium changes. 

Reinforce his or her responsibility to maintain adequate records. Advise what specific information will be  needed to complete the audit.  


Utilize proper premium calculation forms. If the carrier has its own form for calculating premiums for policies  subject to audit, use that form. 


Strategize how to respond to an audit.   

Discuss with agency management, or the producer, the best approach to promptly disclose premium  increases to the client.

In the event of a mistake, advise your client that you are looking into the matter. 

Collect your information and contact your E&O carrier.   

Together, determine if there are any solutions to the problem.   

Discuss how best to communicate with the client. 

While not all premium audit problems can be avoided, proper knowledge, explanation, and planning go a long way toward maintaining a positive relationship with your customer and minimizing the E&O exposure to your agency. 

The material contained in this article is for informational purposes only and is not for purposes of providing legal advice.You should contact your attorney to obtain advice with respect to any particular issue or problem.

Tags:  E&O  Premium Audit 

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What Exactly is an E&O Claim?

Posted By Curt Pearsall, CPCU, AIAF, CPIA, Friday, March 29, 2019

This may sound like a basic question, but don’t think for a second that everyone in your agency knows exactly what an E&O claim is. In many instances, some of the agency’s less experienced staff may not have had the benefit of someone educating them on this important issue.

Face it, there is a good chance that virtually everyone in the agency has made a mistake in their insurance career. The mistakes can vary from not providing the coverage your client requested to providing your client with totally incorrect information on how a certain coverage would respond, in the event of a claim. While perfection may be your goal, with the pace that agency staff must perform, reaching that goal is probably easier said than done.

So, should every “mistake” be considered an E&O claim? No. There is a common analogy that for a mistake to develop into an E&O claim, the “planets need to align.” Therefore, when the client asks for collision on their vehicle, and you discover that you only provided comprehensive, that by itself would not be an E&O claim. You simply would have the policy endorsed to include collision coverage. But when the client suffers a loss because of the error you committed, these are the situations that have the potential to become an E&O claim. The bottom line is your mistake caused the client to suffer an uninsured loss. 

There is also the possibility that the client suffers an uninsured (or not fully insured) loss, yet the agency technically did not make a mistake. For example, the client puts an addition on their house that would increase the value of the home, but they fail to advise you, as their agent, of this exposure change. The home sustains a loss, but the settlement is less than what the client believes is correct. The client could bring a suit against the agency alleging an error. So, as is commonly known in the insurance world, “you don’t have to do anything wrong to be sued.”

Every E&O policy defines what a claim is. Typically, it is defined as, “a written demand or written notice, including service of a subpoena, suit or demand for arbitration, received by one or more insureds which alleges a wrongful act or asks for money or services.”

A very significant issue here is that since “you don’t have to do anything wrong to get sued,” the agency must be diligent in not admitting any degree of liability. Even if the agency technically did make a mistake, it is still critical that the agency not make an admission of guilt. If the agency were to do so, there are potentially some very serious implications. E&O policies typically include language in the conditions section of the policy that state, “no insured will, except at that insured’s own cost, voluntarily make a payment, assume any obligation or incur any expense without our (the E&O carrier) consent.” This section dealing with the admission of liability has the potential to result in the E&O carrier denying the claim and consequently leaving your agency fully responsible for the legal costs and damages. This is not an issue you want to face. It is highly suggested that agency management mention and continuously reinforce the importance of not admitting liability.

Basically, this is because E&O policies are based on the premise of “legal liability.” In other words, just because the agency made a mistake and the client suffers a loss does not automatically make the agency legally liable. There are a host of defenses that the agency could raise that could minimize or even eliminate any agency liability. In addition, clients have a standard of care they are expected to honor. One of the more prevalent ones involves the client’s duty to read their policy. If the client would have seen they didn’t have any collision but did not contact the agency, this could change the direction of a potential E&O claim.

Educating the staff on “what exactly is an E&O claim” would be a positive step in the right direction. 

The material contained in this article is for informational purposes only and is not for purposes of providing legal advice.You should contact your attorney to obtain advice with respect to any particular issue or problem.

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Recent Hurricanes Producing More Flood Claims than Wind Claims

Posted By Administration, Wednesday, February 27, 2019

from Utica National Insurance Group

When each story was written about Superstorm Sandy, Hurricane Harvey and Hurricane Florence it was ultimately the flooding that produced the biggest financial loss. Unlike wind or other exposures associated with this type of occurrence, flooding is not covered by standard Homeowners or Commercial Property policies. Many insureds found themselves without coverage or with less than adequate limits following these powerful storms. Some relief was available through government loans.

Where did many flood victims turn in search of the funding to rebuild their lives?

Their insurance agency and their Errors and Omissions Coverage.

With the frequency and severity of recent storms and flooding events, it is even more incumbent upon agents today to inform insureds of the risk of flood and the availability of risk evaluation tools, mitigation techniques, and coverage through the government (NFIP) and/or private insurers. Failure to do so can lead desperate insureds to take action against their insurance agent.

The following are actual E&O claims associated with the peril of flood along with suggestions regarding how to avoid them in your agency.

Failure to place flood coverage 

The insured is a long-term customer of the agency operating a retail shop written on a      Businessowners Policy (BOP). Superstorm Sandy caused flood damage to the insured’s rented store resulting in contents and inventory damage. The BOP carrier declined the claim. The insured sued the agency for failure to offer flood coverage. The agency did not document their file that flood coverage was offered/declined. The result was a $325,000 E&O claim with an additional $145,000 of loss adjustment expenses.

The E&O risk management solution is to offer all insureds the option to purchase flood coverage in writing, have the insured sign acceptance or denial of coverage form, document the agency file, and repeat at each subsequent renewal.

Failure to place flood coverage 

The insured is a long-term customer of the agency operating a retail shop written on a Businessowners Policy (BOP). Superstorm Sandy caused flood damage to the insured’s rented store resulting in contents and inventory damage. The BOP carrier declined the claim. The insured sued the agency for failure to offer flood coverage. The agency did not document their file that flood coverage was offered/declined. The result was a $325,000 E&O claim with an additional $145,000 of loss adjustment expenses.

The E&O risk management solution is to offer all insureds the option to purchase flood coverage in writing, have the insured sign acceptance or denial of coverage form, document the agency file, and repeat at each subsequent renewal.

Failure to procure adequate flood limits 

The agency has written the insured’s building coverage, including flood, at the same limit for several years. The insured owned and operated a manufacturing operation, under a different name, which occupied the building. The manufacturing operation was not a named insured under the flood policy nor was contents coverage provided. Superstorm Sandy flooded the building. Flood damage to the building was covered, but there was no coverage for the tenant’s contents. The result was a $280,000 E&O claim with an additional $65,000 of loss adjustment expenses.

The E&O risk management solution is to offer all insureds the option to purchase flood coverage in writing, have the insured sign an acceptance or denial of coverage form, ask the insured if any changes have taken place in their business which would require additional coverage or limits, document the agency file, and repeat at each subsequent renewal.

Failure to adequately explain flood policy provisions 

The agency writes a large, complicated property policy for a supermarket chain encompassing numerous locations in multiple states. The Flood Coverage is provided with many unique coverage provisions. Superstorm Sandy caused flood losses at several of the insured locations. The flood claim adjustment accounted for the various provisions in the policy resulting in the insured receiving far less coverage than they anticipated. The insured sued the agency. The result was a $2,500,000 E&O claim with an additional $1,500,000 of loss adjustment expenses.

The E&O risk management solution is to review all unique coverages, policy provisions, exclusions, and limitations with the insured; offer examples of how specific claim situations will be handled in the event of a flood loss; have the insured sign an acceptance of understanding form; document the agency file; and repeat at each subsequent renewal.

All of the above examples show that flood insurance is a frequent cause of E&O claims against insurance agents. Taking time to understand the flood insurance options, offering all options to your clients, and documentation of their declination or acceptance of your proposal is sound customer service and E&O loss prevention.

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Ordinance and Law: Are You Discussing This Coverage With Your Clients?

Posted By Curt Pearsall, CPCU, AIAF, CPIA, Thursday, January 3, 2019

Do you think everyone in your agency is knowledgeable about Ordinance and Law Coverage? There’s a good chance that not everyone is familiar with it. The coverage is fairly unique but is very important.

Ordinance and Law Coverage is typically included on Homeowners policies. The standard coverage is usually a low percentage of the Coverage A limit, around 10% with higher percentage limits available for an additional premium. Ordinance and Law Coverage can pay not only for rebuilding a destroyed home but also upgrading the home, so it meets current building codes.

When looking at a claim that involved Ordinance and Law Coverage, the lowest policy amount was not enough. The claim alleged the agency failed to procure the requested coverage for the agency’s client. The key issue was that the agency staff member was unaware of the differences in three options under the Ordinance and Law Coverage and thought the client had limits of $100,000 under this coverage when, in fact, they only had $10,000.

After the client’s roof suffered hail damage, it was determined the building code had changed and required the client to add a membrane coating under the roof. The client was seeking $100,000 under the Ordinance and Law Coverage, far more than the $10,000 policy limit. The client sued for the additional $90,000 alleging the agency failed to procure the requested coverage and did not properly understand the options/coverage provided. An E&O claim was brought against the agency.

Could this type of claim happen in your agency?

Ordinance and Law Coverage can include three separate types of coverage:

Coverage for Loss to the Undamaged Portion of the Building − In some jurisdictions, the building code may require that a partially damaged building be demolished. This type of coverage states that if this type of ordinance is in place and enforced by the local authorities, the insurance policy will treat the claim as a total loss even though the building was only partially damaged.

Increased Demolition Cost − This type of coverage applies to the cost of the demolition to the undamaged portions of the building.

Increased Cost of Construction − This type of coverage applies to any increased expenses incurred to upgrade, repair, or replace the building while conforming to the current building laws or ordinances.

The basic coverage in the Homeowners policy may not be enough for these associated costs, as in the claim example above. At a minimum, the agency should make the client aware of what the Ordinance and Law Coverage can provide and the limits available.

Some agency staff may think the coverage is only for older homes, but that is not true. There is a possibility that homes built 10 years ago could have this exposure if the municipality where the client resides has undergone some type of a building code change.

Agencies should consider the following tips for Ordinance and Law Coverage:
Provide agency staff, Personal and Commercial Lines, with the necessary training to ensure they know the coverage and how to properly explain it.

All proposals should include reference to this coverage and the additional limits available for purchase.

There should be clear documentation with the client’s signature of any agreed upon coverages and limits.

Consider educating current and prospective clients on the importance and implications of this coverage, possibly in a social media campaign that could generate additional sales.

Typically, when discussing Homeowners Coverage, the more prominent threats (fire, theft, etc.) are discussed. Agencies should not discount the importance of Ordinance and Law Coverage.

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E&O and Your Agency Website

Posted By Curt Pearsall, CPCU, AIAF, CPIA, Wednesday, November 28, 2018

How do most agency websites get developed? Typically, the agency contracts with a marketing firm to build a website that is very impressive and says a lot of great things about the agency and the type of business the agency handles. After all, isn’t the website designed to impress current and prospective clients to induce them to deal with the agency? 

Is there the possibility that the website makes statements that technically are not true? 

Statements such as:

  • We will identify your exposures to ensure that you are properly covered.
  • We will search the entire marketplace to provide you with the best coverage.
  • We will ensure you have no gaps in your insurance program.
  • We will annually update your property values to ensure that you are not penalized in the event of a property loss. 

These all sound impressive and may assist in the agency landing the account. You are probably wondering “so what’s the problem?”

A problem arises when the website makes a statement that is not correct. Actually, the last statement noted was a key issue in an E&O case I was involved in many years ago. The problem was the agency did not do what the website stated and the client suffered a fire loss that resulted in a $500,000 co-insurance penalty.

Agencies need to understand that the website could be a key factor in determining the direction of an E&O claim. Both plaintiff and defense counsel will be reviewing the website 1) to determine its applicability to the case and 2) to determine whether the agency honored what the website stated.

When looking to have a website designed / updated, the issue may not be what words / phrases to use but instead, what words / phrases to avoid. It is best to avoid words such as “expert” or “specialist” as they have the potential to raise the legal standard the agency could be held to. In addition, the goal should be for the website to accurately state the capabilities of the agency. To state “we will ensure you have no gaps in your insurance program” (this is an actual statement in an agency website) is really not possible. The agency can work with the client to identify the various exposures but at the end of the day, it is up to the client whether they buy the coverages discussed.

Another issue that is often overlooked deals with the communication of your agency objectives to the staff. In many of the cases where I ask a producer about the agency website, their response is “I have no idea what our website says”. All agency personnel should be keenly aware of what the website (as well as other promotional material) says about the agency.

It is very important for agencies to have a strong message on their website. Just make sure that it is not saying things about your agency that really aren’t true.

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Agency Producers: We Need Your Total E&O Commitment

Posted By Curt Pearsall, CPCU, AIAF, CPIA, Tuesday, October 30, 2018

Without a doubt, the agency sales producers are “the key” for an agency to have a solid commitment towards preventing possible errors and omissions (E&O) claims. This means a 100% buy-in from every producer, every day.

For over the last 50 years, insurance producers have been at the heart of most E&O claims. Essentially, one out of every two E&O claims alleges an “error or omission” from the ranks of the insurance producer. 

Here are some key issues for producers to be aware of:

› The need to listen. In many, if not all, states an insurance producer (agent/broker) has a common-law duty to obtain the coverage the client specifically requests within a reasonable time period. Thus, listening to the words of your client/prospect is extremely important. Since there may be situations where the producer can’t secure the coverage requested, they also have  a further duty to inform the client the reason why the coverage cannot be secured.

› The need to document. While producers may possess a very good skill set, including strong technical knowledge and solid sales skills, there is one thing, that very honestly, they seem to struggle with: documentation. The lack of quality documentation is a key issue in E&O claims. Documentation truly is the one critical piece that may determine the success of the agency in prevailing in an E&O matter. 

› Note taking. As producers interact with customers, it should be a practice to be taking notes of the discussions. When clients make decisions on the coverages they want and don’t want, the producers are typically requested to get the clients’ signature. While putting this information in the file or agency management system is a positive step, it is just as important that these conversations and the decisions made be “memorialized” back to the customer. For example, if the client calls to advise they are not interested in a coverage proposed, the best approach is for the producer to send the client a note recapping the discussion. The goal of this extra step is to ensure there is no misunderstanding between the parties. The extra time spent on documentation may very well be the key in the direction of the next E&O claim.

› Don’t rely on your memory. Let your documentation tell the story. It is not uncommon for the courts to take the position that, “if it’s not in the file, it didn’t happen.”

› Sell what you know and know what you sell. It is imperative for producers to possess strong technical knowledge for interactions with prospects and customers. In addition, due to the evolution of our industry, keeping up with that level of knowledge is critical. Current issues such as drones, cyber, and others require the producer to keep with their commitment to learning. 

› Be honest with the carriers you use. In the completion of applications, it is critical that the markets be provided with a full and accurate disclosure of the risk. The relationship between your carriers and your agency is built on trust. Being totally honest is a key part of that relationship. The downside of being “less than honest” is extremely significant and is not a place you want yourself in.

› Watch your words. Due to the tremendous pressure to sell, producers may be inclined to position themselves and their agency in the best favorable light. While various marketing “puff” may enhance the ability to be successful, producers must be careful and deliberate in the words and phrases used for promotion. Avoid stating you are an “expert.” Also avoid phrases such as, “we make sure you are properly covered,” or, “this coverage is definitely better than what you have.”

As a producer, you play a key role in determining whether your agency will face an E&O claim. The decision to be careful is yours to make!

The material contained in this article is for informational purposes only and is not for purposes of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.

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Producer's Don't Know What They Don't Know

Posted By Curt Pearsall, CPCU, AIAF, CPIA, Wednesday, September 26, 2018

As most insurance professionals would admit, insurance can be somewhat of a complicated issue. There are multiple coverages and, for some of those coverages, the forms of the various carriers are not similar. This poses some tremendous challenges for agency sales staff when they are meeting with prospects or clients.

For over the last 50 years, the number one cause of errors and omissions (E&O) claims has been “failure to provide the proper coverage.” This is obviously where effective use of an exposure analysis checklist could bear positive results. But that may be just part of the equation. 

The exposure analysis checklist (especially those developed by many of the industry software carriers and periodicals) will typically list, by class of business, the key exposures faced by that type of business. Thus, for agents looking to sell coverage to a risk, such as a marina, doing some homework on the exposures of a marina would certainly be time well spent. However, it is important to do more than just address those exposures with the client. It is critical for the agency representative to know the coverages in detail. 

For example, just because the agency representative knows that the client has a cyber exposure, this does not mean that the agency producer would automatically address this with the client. A recent study showed that cyber was oftentimes not brought up in discussions with clients because the sales staff didn’t fully understand cyber and were afraid they would be asked a question that they could not answer.

In some respects, this was smart because one of the key elements of the typical standard of care for insurance agents is that they will be held responsible for what they say and what they put in writing. Thus, if they were asked a question regarding cyber and provided inaccurate information, they could be held responsible if a wrong answer was a key issue. On the other hand, taking that approach of avoiding discussion may just result in less production for the producer and less growth for the agency. The better approach is to ensure that the sales staff are provided with the necessary training. Not every agency can have a person solely dedicated to training, but it is still incumbent upon the agency to have some degree of focus on education. 

Agencies with some specialization should consider having their sales staff develop a higher level of technical expertise in specific areas such as construction, nonprofit, habitational, etc. This will enable the staff to become totally knowledgeable on, not only the issues of those specific type of clients but also the coverages those clients should consider. 

If there is the potential for claims-made coverage to be part of the insurance portfolio, agencies should ensure that the nuances of this type of coverage be discussed in detail. For example, the “retro date” issue on claims-made coverages has not only generated a fair number of E&O claims but also some very significant ones when the “retro date” was not properly handled. 

Producers may, “not know what they don’t know.” To assist in identifying key areas where the technical knowledge is not at the desired level, agency management should perform an evaluation of each member of the sales staff to determine his or her level of knowledge and to identify training opportunities. This could be done using a test or possibly a mock sales presentation where the staff is asked various questions about specific coverages. Once the knowledge level is determined, the training can be customized using approaches, including:

weekly or monthly sessions in a classroom environment where a specific type of coverage or the type of business is discussed and the exposures dissected;
using the education sessions conducted by your state agents’ association; and 
training organizations, such as the Institute or the National Alliance.

Bottom line, training of staff needs to be a key issue within every agency. This will not only result in staff being knowledgeable on the coverage they are selling, but it should also greatly minimize the potential for your agency to face an E&O claim. 

 The material contained in this article is for informational purposes only and is not for purposes of providing legal advice.You should contact your attorney to obtain advice with respect to any particular issue or problem.

Tags:  E&O 

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Accountability: A Missing Piece in Many Agencies

Posted By Curt Pearsall, CPCU, AIAF, CPIA, Wednesday, August 29, 2018

Accountability is a key element that needs to be in place for agencies to achieve a solid errors and omissions (E&O) culture. It is also necessary for agencies, or any business, to become a great organization. In the words of author Henry Evans, “a culture of accountability makes a good organization great and a great organization unstoppable.”

Can your team look each other in the eyes and convince one another the job was handled in the manner the firm wants and that you achieved the desired results? Can you look yourself in the eye and convince yourself of the same thing? 

For many agencies, the issue that is holding them back from achieving the “great organization” status is their level of accountability. Accountability in an organization does not just happen. In fact, it is more than each employee looking at themselves in the mirror and convincing themselves they did the job. Many business experts feel that organizational health will surpass all other disciplines in business as the greatest opportunity for improvement and competitive advantage. Peer-to-peer accountability is considered the primary and most effective source of accountability on the leadership team of a healthy organization. 

One of the key issues to begin the process of achieving accountability is defining the expected results. For an insurance agency, there are many expected results. They include various issues involving the pre-sale, sale, and post-sale processes. The issues could involve the completion of an exposure analysis checklist, quality and timely documentation of client discussions, the completion of the application, timely follow-up, confirmation of client purchasing decisions, management of one’s workload, policy review, policy delivery, etc.

Staff should not have to guess or assume they know the expected results. The expectations should be documented and periodically communicated to all staff, including producers. This will help to ensure there are no misunderstandings. 

Nothing will frustrate an employee more than a belief that not all employees are held to the same level of accountability. In some cases, there may be the belief that some employees are not held accountable at all. The frustration level may get to the point where a firm will lose some of their better employees.  

Many staff probably feel they can walk out at the end of the day and say, “I did my job.” Accountability is more than each person feeling they did their job. The objective is for the firm’s goals to be achieved, whatever those goals happen to be. Achieving a greater level of accountability and becoming a GREAT organization requires teams with a level of joint accountability.

This level of joint accountability is essentially the responsibility and the product of management as they are, at the end of the day, ultimately responsible for results. A culture of joint accountability is necessary for the firm’s results to be achieved. Management should not look for employees to just do their jobs. They should look for them to achieve the expected results. An employee’s job is to achieve results and to go above and beyond. Motivating and inspiring the staff to do that should be a key goal of a firm’s leadership.   

How can an agency measure their degree of accountability? 

Since a significant part of the goal is to determine whether staff are meeting the firm’s expectations, one way to do this is through an internal auditing process. When a firm strides to enhance their culture of accountability, audit results will definitely shed some light on whether progress is being made or not. If an individual or division is not passing their audits, there is a good chance they will not be achieving the results they are striving for. When the audit results are not at the expected level, the individual (or team) should be required to develop an action plan to improve the audit scores moving forward. This initiative is a positive step in achieving the desired level of accountability.

What is the level of accountability in your firm? 

You might want to ask the staff. They probably know the answer.  

The material contained in this article is for informational purposes only and is not for purposes of providing legal advice.You should contact your attorney to obtain advice with respect to any particular issue or problem.


Tags:  E&O  insurance 

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Are You a Good Agency or a Great One?

Posted By Curtis M. Pearsall, CPCU, CPIA , Tuesday, May 1, 2018

from Utica National 

Obviously this is a matter of opinion. In fact, it’s worth asking—whose opinion really counts? Is it you and your staff’s opinion that counts, or is your customer’s opinion really the key? Personally, I think it is the customer’s opinion that matters most. That aside, there are some agency basics that you need to address before you can even consider the question of “good” or “great.”

In the national best-selling book, Good to Great, Jim Collins states that to go from a good organization to a great one, one of the first strategies they implemented “was they first got the right people on the bus, took the wrong people off the bus, and put the right people in the right seats—and then figured out where to drive it." Anything short of this and you will not be able to achieve the status you desire. Since the biggest part of an agency is the people, to be a great agency, you need to have the right people.

We all know that although the insurance industry is a great industry to work in, most people don’t grow up saying that they want a career in it. In fact, within Utica Mutual, I know of only a handful of employees that actually went to school for insurance. Personally, I started out as a weekend radio disc jockey and since that was not enough to pay the bills, I needed to find work during the week. I sold door-to-door for Combined Life, then I went to Metropolitan, then to the agency side of the business and so on.

All that being said, it stands to reason that there is a good chance that when you hire staff, they are in need of various degrees of training. Putting them at a desk and assuming that they have all of the talents and skills necessary can be a big mistake. The old days of “here is your desk, here is your phone, here are the files, any questions?” didn’t work then and it sure doesn’t work now.

A good starting point for new employees is a solid orientation program. Most agencies have their new staff start off by sitting with staff from various aspects of the agency (accounting, receptionist, commercial lines, personal lines, claims, producers, etc.) to get a handle on the culture of the agency, the file structure, the various responsibilities, etc. In many agencies, it is at least a month before new staff goes live taking calls and handling files. Obviously, experience needs to be factored but even when you hire an experienced insurance person, no two agencies handle business the same way and a brief orientation program would be of benefit even to a veteran. So whether your new employee is new to the business, or joins you as a seasoned veteran, a solid orientation program is a great place to start.

We all know that this business is changing at a rapid pace—new products, new forms, new companies, etc. Keeping up requires a commitment to training on an ongoing basis. These changes present perfect opportunities at your staff meetings to review the latest industry and company news. An individual development plan with a strong focus on training should be a part of every staff’s annual goals and objectives. When was the last time you asked your staff if they needed/desired any training? Try it; you may be very surprised at their response.

Monitoring the quality of the work product is very important and some type of quality control/checkup needs to be done. It is good to trust your staff but to trust without verification can be a formula for disaster. Someone in the agency must have some responsibilities for verifying that the staff is handling files and customers in accordance with the agency plan and goals. You need to know if the staff is doing what is expected. You also need to know if you have a weak link.

Now to the weak link—if you have an employee who is struggling, and you can honestly say that you have done everything possible to help the employee, you need to make that unpleasant decision. Not only could the employee be holding you back from getting to the next level, but they could be an E&O nightmare waiting to happen.

Make the commitment to being a great agency—it all starts with the right people in the right positions heading in the right direction.

The material contained in this article is for informational purposes only and is not for purposes of providing legal advice.You should contact your attorney to obtain advice with respect to any particular issue or problem.

Tags:  E&O  insurance agency 

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Are You Guilty of Presumptions?

Posted By Curt Pearsall, CPCU, AIAF, CPIA, Tuesday, April 3, 2018

Very honestly, I believe that more insurance agency folks are than they realize.

What is the “presumption” that I am referring to? This is where you (the agency staff) believe that you know what coverages the client needs or what limits are appropriate. For example, let’s presume that your client (personal or commercial) has a $5mil umbrella. At renewal time, are you providing them with options for higher limits or does your proposal state “higher limits may be available”? Or are you presuming that $5mil is more than sufficient for this client?

Over the years, I have had agency staff make comments such as the following:

  • “I didn’t offer them an umbrella – I didn’t think they could afford it”.
    “the client asked me if $5mil was enough and I advised them that $5mil was more than most clients carry”.
  • “the client told me that they were told they should have higher limits. I advised them that they were good with what they had”.
  • All the above deal with umbrella but the same could be said for virtually any line of business, personal or commercial.

Are you guilty of presuming? When you presume, you are essentially telling the client that you know them as well as they know themselves. When a loss occurs and the loss is not fully or even partially covered, the client is going to be coming after you for “poor advice”. The truth is that they will probably have a case against you based on your verbal or written comments.

It is important to remember that agents can be held accountable for what they say and what they put in writing. So, if you (for example) don’t provide contents coverage for a client’s vacation home (this is a true story) because you don’t think they would buy it and they have a loss and there is no contents coverage, your agency may not have much of a defense.

The appropriate “best practices approach” is to offer the coverage / higher limit options and let the client decide. I call this “customer accountability” and this should be an objective of every agency.

Everyone knows what happens when you “assume”. Well, I can tell you that “presuming” is not much better.

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