E&O Insights: Managing Disasters from an E&O Perspective

If your agency is looking to manage disasters and catastrophes from an errors and omissions (E&O) perspective, could performing account reviews for your clients be just the answer? Absolutely. As many agencies discovered, account reviews are a tremendous tool that accomplish many objectives.

First and foremost is the customer service/customer care associated with this objective. Performing a review allows the agency to interact with each client to get an update on the client’s exposures. As a client’s exposures change, however, a result can be exposures that are not properly insured. Your agency can help educate the client by discussing changing exposures – and securing coverage before a loss occurs as opposed to after.

Put yourself in the shoes of an insurance consumer. As you look at insuring your various exposures, would you rather be a client of an agency that took the time to make sure there are no surprises at the time of a loss, or would you prefer to be with an agency you rarely, if ever, heard from, that simply renewed your policy year after year?

Recent personal lines surveys have indicated that insurance agencies write, on average, around 1.65 policies per account. (Do you know your agency’s number?) When you consider that, at a minimum, the average personal lines account has at least six to eight policy opportunities, this indicates there is some real potential to write business. In all likelihood, agencies that perform an agency audit/review have a much higher average number of policies per account and more business.

Offer Annual Reviews

For many reasons, including the management of “the unknown disaster of tomorrow,” performing an annual review with each client should be part of your agency’s culture. Offer it to every client and, if a client does not want the review, that should be the client’s decision.

This “offer,” whether accepted or not, would be part of the agency’s defense if an E&O claim developed and the customer alleged an uninsured exposure. One of the agencies cited for this best practice actually requires the review be done and will not take on a prospect as a client unless the account agrees to go through the review process. For that agency, it is evident the culture involves establishing and building a relationship with each client. Without a doubt, this “investment” philosophy will result in a higher number of policies per account as well as better-than-average renewal-retention results.

Getting It Done

There are numerous ways to perform an annual review. The most effective involves physically sitting with the customer for a face-to-face discussion. This can present some logistical issues because of the customer’s work schedule, unless your agency is open on Saturdays. Conducting the review over the phone is another approach, but once again, this might present some logistical issues because of work schedules. Performing the review could last upwards of an hour, so it may be difficult for the customer during the work week.

It is obviously important to clearly explain the purpose of the review, emphasizing it is designed for the customer to understand his or her current coverage and to discuss any uninsured exposures. Citing that many customers were not properly insured due to Superstorm Sandy may help the customer to better understand the overall reason for the agency’s approach. Another approach – and probably a more realistic one – involves sending the customer a form which provides a host of questions for the customer to consider, such as:

• Do you have any collectibles, fine arts, stamps, coins, etc.?
• Do you have a business in your home?
• Have you installed a home fire or security alarm?
• Do you have a personal umbrella policy?
• Do you have flood/earthquake insurance?

While some questions deal with loss control areas that could result in the customer receiving discounts on current coverage, other questions look to uncover exposures where the current policy – for example, a homeowners policy – may not be sufficient to provide the necessary coverage.

Many of the various exposure analysis checklists contain these types of questionnaires. Sending them with a cover letter or email is an effective way to handle this.

An account review is a great tool to assist your customers in protecting their assets. Your sales will be enhanced and your E&O exposure will be minimized. Sounds like a win-win for everyone.