Agency E&O Culture

Now more than ever agents are stepping up to the plate to protect their business. The experts agree that today agencies are more aware and proactive about reducing errors and omissions (E&O) risk.

“Agents have stepped up over the years and they’re becoming more cognizant of E&O exposures every day,” Sabrena Sally, head of Swiss Re Corporate Solutions’ U.S. Agents E&O program, told Insurance Journal. Some of that effort has been pushed by the E&O carriers. For example, the Big “I” program’s risk management efforts have greatly expanded over the past 10 years, she said.

But it’s more than just from an E&O side, she said. “Agencies are recognizing that what it takes to protect themselves on the E&O side are the same types of things that are required in order for them to run an efficient and profitable agency.”

Curtis Pearsall, president of Pearsall Associates Inc., a risk management consulting firm specializing in agency E&O, and a special consultant to the Utica National Agents E&O program, said in his 40 years in the business, he sees the agency E&O culture today much stronger and healthier than it’s ever been.

“I think agents deserve a tremendous amount of credit for giving their E&O prevention the proper focus,” Pearsall said. “That’s one reason why claim frequency is down to the level that it is. Why? Agents are doing a much better job than they’ve ever done before.”

According to Insurance Journal‘s 2014 Agency E&O Survey, published in the Nov. 3 issue, agencies have undertaken a number of risk management initiatives to reduce their exposure to E&O claims.

Here’s a list of E&O risk management procedures reported by agencies responding to the survey:

• We modified existing procedures as a result of a loss.
• We have an employee perform audits.
• We will be doing a third party E&O audit in 2015.
• We invested in a new management system for better documentation and procedures.
• We revised compensation agreements to hold individual producers responsible for a portion of the deductible.
• We reviewed specialty lines to be sure certain offers of enhanced coverages had been offered.
• We have created an in-house training program on technical issues for all CSRs and producers.
• We always obtain signatures on changes in policy coverage.
• We have several staff attend company seminars on agency E&O and other related subjects.
• We created coverage acknowledgement sheets.

What have you done to reduce your agency’s E&O risk lately?

For additional agency E&O tips, see Curtis Pearsall’s “E&O Insights” column on page 26.