New-deductable-reduction
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Deductible Reduction Offers Policyholders Significant Savings
Written Documentation Can Save You Thousands
Using Big “I” Virtual Risk Consultant Could Help Reduce E&O Deductible
To help you receive the Deductible Reduction and improve the insurance knowledge of agency staff, the Big “I” offers the Big “I” Virtual Risk Consultant Powered by Rough Notes. Using the risk exposure questionnaires and E&O coverage checklists can help your agency uncover opportunities to provide coverage and provide valuable documentation for the customer file to help you secure the new E&O policy’s Deductible Reduction benefit. Click here to learn about gaining access to the agency enhancing tool.
 It’s pretty likely that every E&O seminar that you’ve ever been to preached DOCUMENT, DOCUMENT, DOCUMENT! Hopefully, you were listening and more importantly you were implementing sound agency procedures to document the offer and rejection of coverage to customers. If you were, you are well positioned to potentially save thousands of dollars with the introduction of Swiss Re Corporate Solutions’ new policy form and the “Deductible Reduction” feature.
The Deductible Reduction provision provides policyholders with up to a 50% reduction of the deductible (up to a maximum of $12,500) for claims alleging failure to procure coverage where Swiss Re determines the agency has written documentation in the customer file refuting such a claim. With about 1 in 4 claims alleging failure to procure coverage, this policy feature can result in significant cost savings if the refusal of coverage and higher limits is documented.
While some carriers in the E&O market may offer “vanishing deductibles” as part of their policies that seem attractive, they really don’t compare to Swiss Re’s Deductible Reduction. Here’s why:
1. IMMEDIATE: The opportunity to save 50% on the deductible is immediate - you don’t have to be claims-free over time to build up incremental discounts.
2. LONG-TERM BENEFIT: Even if you have claims you do not lose your eligibility to qualify for the Deductible Reduction since it is based on the documentation in the customer’s file for each particular claim. This is unlike other vanishing deductible models from other carriers that are based on being claim-free. One claim and you have to be claims free for another 5 years to get the same benefit of Swiss Re’s Deductible Reduction.
3. MORE SAVINGS: Some carriers limit the size in which their vanishing deductible will apply with their claims-free accumulated experience. While the Deductible Reduction is capped at 50% of the deductible up to $12,500, there is no limit on the number of claims that it could apply to. See the below example of the potential savings over the course of several policy periods. We assume the policy has a January 1st effective date and a $10,000 deductible in Year 1 which changes to $15,000 in Year 2. Further, the claims made against the agency allege failure to recommend coverage or higher limits and where the agent has written documentation showing the customer was offered and rejected coverage:
Claim Date |
Policy Year |
Deductible |
Savings |
1. February 1st |
Year 1 |
$10,000 |
$5,000 |
2. June 15th |
Year 1 |
$10,000 |
$5,000 |
3. October 31st |
Year 2 |
$15,000 |
$7,500 |
4. November 3rd |
Year 2 |
$15,000 |
$7,500 |
TOTAL DEDUCTIBLE SAVINGS (over 2 policy periods) |
$25,000 |
The savings from the Deductible Reduction provision can be significant. With an average of 1 in 7 agents reporting incidents to their E&O carrier in a given year, the Deductible Reduction is a huge benefit and one that needs to factor into your E&O purchasing decision. But you can’t lose sight of the need to: understand the operations and exposures of customers; implement a best practices approach offering additional coverages and increased limits; and thoroughly documenting customers’ files on all customer interactions, especially the written acceptance and rejection of coverage. For those that have not renewed on the new policy form, keep in mind that the liberalization clause in your current policy allows you to benefit NOW! DON’T HESITATE TO START OFFERING COVERAGE/HIGHER LIMITS AND MAINTAINING THOROUGH DOCUMENTATION. |
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