I read an article a while back in the Toronto Star that struckhome. It was called, “$80 and I'm a SecurityGuard.” The author tells the story of how he dropped by theMinistry of Community Safety and Correctional Services with apassport photo, completed a security guard application and gave theclerk $80. The clerk asked him if he'd also like a privateinvestigator's license. What did that take? Another $80. Two weekslater, his security guard and private investigator's licensematerialized in his mailbox. As he put it, “I'm now fully licensedfor two jobs I have no idea how to perform.”

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Sound familiar?

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When I conducted agent licensing schools, I used to showattendees at the end of their 3-day classroom training a photo of amanicurist with the caption, “What do you have in common with thiswoman?” The answer was, “Nothing…this woman has 15 times theeducation in her field than you do in yours.”

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In our state, a manicurist had to complete 600 hours ofclassroom and supervised work experience before being licensed. Abeautician required 1,500 hours. An insurance agent? Put in 40hours—24 in the classroom and 16 self-study—and you could belicensed to bid on General Motors' account in the morning andMicrosoft's in the afternoon.

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Insurance policies are contracts. While attorneys focusing oncontract law typically spend at least 7 years preparing for theircareers, insurance agents often spend…a week. Attorneys take arigorous bar exam. Many of them don't pass it the first time. Someof them never pass it. Insurance agents who were working at aconvenience store last week take exams that sometimes have passingrates exceeding 90 percent. Attorney CE may be governed by thestate Supreme Court, which restricts who can deliver CE and whatmust qualify. The educational comprehension level of agent trainingand testing material is often at a fifth- and sixth- gradelevel.

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Too often, what passes for insurance agent CE consists of aself-study provider with a 12-hour course called “Insurance TermsA-L,” or 3 hours at an auto glass company rubber chicken luncheonlearning how to steer customers to their business. For onlineeducation, most state insurance departments grant credit hoursbased on a word count. As a result, some providers pad courses withverbiage from marketing brochures just to elevate the word count.Continuing education as an industry has become an end in and ofitself, rather than a means to an end. But that's a rant foranother day.

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Insurance policies are complex contracts. With state insurancedepartments requiring minimum Flesch testscores, policies must be “easy to read” but are often not easyto understand. In a Flesch test, the higher the score, the easierthe material is to read. In one insurance department study, theBible scored a Flesch rating of 66.97, while Einstein's Theory ofSpecial Relativity scored only 17.72. Sadly, a personal automobilepolicy scored just 10.31.

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Many insurance practitioners lack the requisite skills andknowledge to fully understand much less explain the productsthey're selling. Too often, underwriters and adjusters don't,either. Here is a deposition excerpt in which an agency owner wasasked to explain coinsurance:

I could give you the wrong thing, and I can stand to becorrected. But on coinsurance if you've got, like, a milliondollars worth of coverage and if a person has an 80 percentcoinsurance factor, all right, that means that it's going to haveto be sure that it is insured up to 80 percent of the value. Thatcomes into play when it's a partial claim is one thing that it willcome into play. If a person is only insured up to 50 percent of thevalue instead of 80 percent, then it would be stated on the policy.Then there would be probably a 30 percent depreciation taken offthe policy. So, the 80 percent is really better than a 90 percentcoinsured or the coinsurance being 100 percent. And so that's onthat particular incident now.

Consultant James R. Mahurin has performed expert witness and litigationsupport since 1993 and has been involved in litigation arising outof Hurricane Katrina for almost 5 years. He has observed thatagents with academic credentials in the form of substantivedesignations, especially CPCU, are (a) rarely the subjectof lawsuits, and (b) far more successful in defending themselves.He believes there is a strong correlation between the quality andextent of educational background and work quality and in depositionperformance.

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According to Mahurin, “A substantial number of insurance agentshold CPCU designations. A smaller number hold CPA certificates, MBAand law degrees. These men and women are involved in many of themost complex insurance programs in the United States andinternationally. This group of agents is much less frequentlysubject to agent litigation. Their performance in deposition andtrial testimony is far, far superior to the average agent.”

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Education and articulation are key elements in successfullydefending an E&O lawsuit. Mahurin cites a national conferencehe attended where an attorney from a prominent plaintiff's law firmsaid that if insurance industry personnel were required to takebasic college level courses about the business of insurance, hislaw firm would have to find something else to do—that his law firmwas successful because the insurance industry doesn't train itspeople.

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One area where this is evident is certificate of insuranceprocessing. This function over the years has been pushed down tolesser skilled and trained staff in agencies. Demands being made onagents today for more detailed certificates, compliance checklistsand “agent affidavits” may require them to review lengthy andcomplex construction contracts, with document completion by staffmembers with little or no formal training in the subject matter. Asa result, one of the largest agents' E&O insurers in thecountry has seen a dramatic escalation in E&O claims involvingcertificates and additional insured requests.

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More important, however, is that most E&O claims arise froma lack of coverage. We all make mistakes, but the combination ofeducation and experience teach us what we don't know. Theindustry's emphasis on process and procedures to reduce litigationis only minimally effective when the practitioners do notunderstand what they don't know. And the E&O implications areonly one side of the education coin. Proper training and educationcan dramatically impact the bottom line from the standpoint ofimproved effectiveness and greater production and accountretention.

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Unfortunately, during hard times, training and education areusually the first budget items to go. One insurer's unpublishedstudy showed that production increased by up to 54 percent forproducers taking Life Underwriting Training Council Fellow (LUTCF) classes andup to 80 percent following completion of the designation. Insuranceagencies typically spend from 0.4 percent to 1.1 percent of revenueon employee education, according to IIABA's best practices study.The U.S. Dept. of Labor suggests that 5 to 12 times as much shouldbe invested in training and education.

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Licensed agents spend 12 to 20 hours per year on education, when100 is recommended. A housekeeper at a Ritz-Carlton hotel receivesa minimum of 120 hours of customer service training beforeinteracting with guests. How many of your agency CSRs have 3 weeksof customer service training in their entire careers? Did you knowthat if you invested only 15 minutes per workday studying policyforms or reading coverage reference manuals, you'd amass more than60 hours of learning each year?

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In the 1970s, a new company underwriter or adjuster typicallyspent up to a year in formal training followed by a year ofsupervised work experience before he or she was unleashed on anunassuming public. Several insurer training schools rivaled collegegraduate schools in the comprehensiveness and difficulty of thesubject matter. Agents often came from these ranks. The CPCUdesignation was actively promoted and supported by both companiesand agencies. More than one carrier insisted that rising stars inthe organization with management destinations actively pursue theCPCU designation. The time has come for each of us to step up andspeak out about the relevance and importance of CPCU and otherInstitute programs.

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