E&O for Agents – A Necessity Even if Mistakes Don’t Happen
Errors and omissions insurance is available, and necessary, not just because mistakes happen. A customer’s perception can be that the reason a loss was not covered, valid or not, was the result of an agent’s mistake. Applying even the most stringent risk management steps may not completely eliminate the hazard of errors or omissions. However, steps can be taken to reduce the exposure through thorough training, careful evaluation of a client’s needs, educating the client and streamlining workflow.
Completing pre-licensing education and passing the state exam does not mean a person is adequately prepared to start meeting with clients alone and binding coverage. The information covered in pre-licensing includes contract provisions, products and regulations. The education provides a foundation on which to build. The products are covered from a general standpoint and are not specific to any particular insurance company.
New hires must be educated about and read the contracts they are selling to learn what their specific policies provide for coverage, what they limit, what they take away in the exclusions and what is available to buy back through endorsements. Only then will a new producer begin to understand what they can do for a potential policyholder.
Develop a Spreadsheet
Developing a spreadsheet can be a useful tool for someone new to the insurance industry. The employee then has information at his or her fingertips regarding underwriting requirements, endorsements available and the like, whether representing one or 20 carriers. Time is necessary to master the details. The most experienced producer will admit, once it is all figured out, that details and rules change. Keep the spreadsheet updated, because it is imperative for agents to be aware of the changes before they become effective.
Analyze the Client’s Needs
After agents have an understanding of the products they represent, the next step is to learn how to properly analyze a client’s insurance needs so the right products can be recommended. Comparing an individual’s or business’s current insurance policies and providing a quote “apples for apples” is not the approach to take. That type of strategy will not only set the insured up for uncovered losses but also the agent up for an errors and omissions claim.
Insurance professionals must learn to use the current policy as only a skeleton outline and ask questions of the prospect to uncover hidden risks. The time invested upfront in information gathering provides greater insight into the client’s potential for loss.
If the premium is cost prohibitive, ways to reduce the client’s exposure to loss or retain a portion of the risk should be discussed with the insured. Reducing the cost to the policyholder is always a concern. Once the market hardens again, and it will, using the risk management process is going to be a competitive necessity. Selling insurance isn’t just writing business, it is acting as a professional and providing coverage that protects the client in his or her moment of crisis. That being said, the new producer should spend time with industry veterans before going it alone.
Use Checklists
Good old-fashioned checklists are still an essential. It is very easy for a conversation to go off in one direction, causing the agent to forget to ask about other needs or to think he or she already asked a specific question.
A checklist is an item of documentation that can stay with every client’s file, even electronically, as proof that certain exposures were discussed and are talked about at regular intervals. Consistency and documentation will prove beneficial when a question arises regarding the agent’s ability. In addition, using a checklist can help to reduce the number of follow-up calls needed to obtain detailed information from the prospect.
Educate the Client
Providing insurance protection also means educating the client. It is no secret that most people do not read their insurance policies. The only time the insured may even think about his or her insurance, other than when a claim is made, is when the person is purchasing new coverage or renewing existing policies.
The initial quote, a policy change or on renewal are the perfect opportunities for insurance agents to speak with clients about their insurance. Draw a connection for them between the exposures and the coverages being recommended. Explain limitations and exclusions that apply, as well as endorsements that are available. Ask the insured or prospect questions to uncover other potential risks. Make recommendations to protect areas of concern, and obtain a signature when the client declines coverage or requests lower limits of protection. This not only protects the insurance professional later on from an uncovered loss, but it also sends the message of the importance of the coverage to the client.
Be Consistent
Consistency in the needs analysis, documentation, quote preparation and proposal delivery are the foundation of the process to assure the client is more than adequately protected. Workflow should be streamlined so the agent knows where his or her responsibilities begin and end.
Tasks should be assigned to staff based on skills. Account managers who work closely with agents should have an eye for detail so that they can accurately check the application prior to submission, and the policy against the application once it is issued. Sales people are hired because they are great at locating prospects and selling products. Great sales people have the skill to do that, and not always the skills necessary to process detailed paperwork.
Agency owners should assign workflow based on the tasks needed and the skills possessed to complete the tasks. This will have a positive impact on quality, reduce duplication of efforts and protect against gaps. It also provides for happier employees.
When the insured contacts the agent with a claim, the desire of both parties is unquestionably a covered loss. If the answer has to be “it’s not covered,” the next best scenario is that the agent did everything right and insurance protection was just not available in that situation.
E&O insurance serves as a safety net. Hopefully it will never be needed, but it does provide “peace of mind” just in case.