By Greg Mattingly, CPLU, Insight Insurance Services Inc.
In these days of belt-tightening, cheap is nice but correct is best to avoid errors & omissions claims.
With all Americans trimming their budgets during these times of economic stress, independent agents often are pressured to make sure their in-force customer doesn't leave for a quote that is slightly cheaper. With this pressure comes the perceived need to shop the customer among the agent's company partners. But agents must take the time to make sure an alterative carrier offering a cheaper rate also provides the same coverages that were offered by the prior carrier.
Related: Read agency E&O survey results with "Perilious times make agency E&O a must."
Not placing the correct coverage continues to be the leading cause of E&O claims in the U.S. today, not much different than before recessionary times.
I have been a specialist in agent and broker E&O coverage for more than 11 years, and although the landscape of carriers offering products has changed, the exposures and pitfalls remain the same. I have attended agent conventions from North Carolina to Michigan to Kentucky to Arkansas these past 6 months, and hear the same sort of coverage questions and claims war stories all across the country.
Agents must recognize that their employees represent them and often are the cause of E&O claims against them. Agents need to be concerned that their employees are educated on current regulations to ensure they are giving correct information to the public. Ask yourself these questions:
- Do your employees know enough to hurt you?
- Do they know enough to say "I don't know" to customers?
- If your receptionist accepts money from customers, does that "bind" the insurance contract?
It is the agent's responsibility to keep staff informed and aware of potential pitfalls. It's a good idea to spring for lunch in the office every so often and go over some E&O basics. Besides sharing knowledge, these types of informal gatherings can build camaraderie on your team. And, your employees might appreciate the free food.
Agents also should monitor the A.M. Best ratings of carriers to make sure you stay current. What if you renew a customer who has been with you 5 or 6 years with a company whose Best rating has been downgraded to a C? Are you comfortable your E&O policy "has your back" when it comes to the insolvency issue?
There's no replacement for service when a claim or problem is looming. Find an E&O carrier that you can call to walk through questions with you. Getting answers when you need them, before a problem occurs, should be an accepted part of the coverage you get from your carrier.
One thing almost everyone agrees is important but most people don't do is document, document, document. When you're on the phone with a customer, pull up his or her file on your computer and update as you talk so you get everything down correctly. Establish a similar procedure for cell phone calls with customers when you are out on the road. Take the time to input a summary of your conversation onto a laptop or PDA while it is still fresh in your mind.
Cyber claims are a newer phenomenon facing the agent today. The fear of piracy of private information and data loss is opening up additional exposures for the agent. Does your customer have protection should their identity be stolen? Do they have coverage if their credit card is illegally used by someone? Make sure your E&O policy covers you for such exposure.
Keep these tips in mind when shopping your coverage. Correct is always best, even if it costs a bit more.
