MGAs Need To Start Educating Retail Agents

Phoenix

Managing general agents must begin thinking of themselves aseducators and start teaching independent agents the unique needs ofthe wholesale market when placing risks, one consultantcontends.

That was the message conveyed by Pegi Flahault, a consultant forTrillium Advisors Inc. in Black Mountain, N.C., during an educationsession here at the annual meeting of the King of Prussia,Pa.-based American Association of Managing General Agents.

In her presentation titled “When What You Don't Know AboutLiability Can Hurt You” she said the combination of more “greenies(new retail agents) coming into the insurance business along withretail agents moving into the wholesale agent ranks” is creating asituation where more agents are looking to the wholesale market tofill their clients' risk-transfer needs.

What they lack, she added, is the understanding that policylanguage is critical, warning that “what seems very simple hasgotten very complex” thanks to the rising threat of coveragelawsuits.

Part of the problem, she said, falls to insurance companies,which have developed silos of responsibilities separating claimsadjusters and underwriters. Because the two sides of the policyequation do not work together, they at times come up with differentinterpretations of the same policy application, she noted, insteadof working together to arrive at the same answer going in.

The other problem, she said, is that some retail agents havebecome “very sloppy,” believing that a businessowners policy coversall commercial risks, which is not the case.

“You are going to be trainers for the next couple of yearsbecause retailers need to have explained to them what kind ofinformation you need,” Ms. Flahault said. “You understand what youneed and you have to pass it on to them.”

To underscore the need to understand the complexity of policylanguage, Ms. Flahault and the group reviewed some past claims andthe legal decisions that came down from them. The MGAs found in theexamples that the courts' ultimate decisions differed decidedlyfrom how they thought the policy should be applied.

“Sometimes we take for granted what we know is what everyoneelse does, but that's not necessarily true,” she continued.“Sometimes it's just a matter of presenting things in a differentway to them and they say, Gosh, why didn't I think of it that waybefore.'”

Reproduced from National Underwriter Edition, May 28, 2004.Copyright 2004 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.