Recent news reports continue to shed light on issues with
the flood claims settlement process in the wake of Superstorm Sandy. These
reports indicate some flood insurance claims for policyholders insured through
the National Flood Insurance Program (“NFIP”) were improperly denied or
manipulated. This negative press and the proliferation of insurers offering
private flood insurance may have your customers seeking guidance on their flood
coverage. If customer are interested in
exploring the private flood insure market, here are a couple E&O risk
management tips to consider. A special
thanks to Don Burke, Flood Marketing Manager at Big “I” endorsed flood
insurance provider Selective Insurance Company of America for sharing this information.
·
Importance of flood insurance – The importance
of customers having flood coverage cannot be understated. While recent media reports on the claims
handling in the Northeast states during Hurricane Sandy have documented the
painful experience that flood policyholders have gone through, it should not
diminish the need to continue to offer flood coverage to new and existing
customers. To protect the agency from
future E&O claims, all discussions with customers, including the offer and
rejection of flood coverage should be documented in the customer file. Consider offering excess flood where
increased limits may be an appropriate option.
Having a signed ACORD 60 Flood Rejection form in the file creates the
foundation for an excellent defense of a potential E&O claim.
·
Admitted vs. Non-admitted: When placing customers on non-NFIP policy
forms, agents should take care to educate customers on the differences. First, is the policy written on an admitted
or non-admitted basis? If non-admitted,
make sure you review the financial rating of the company and share with the
customer that if the company becomes insolvent it is not subject to the states
guaranty fund.
·
Cancellation Issues: The NFIP will not cancel or non-renew a
policy because of losses. Consider
sharing this with your customer. Make
sure they understand that a non-NFIP product probably does not have that same option.
·
Same Coverage and Rates?: Some of the non-NFIP
policies do not offer the same coverage that the NFIP policy may include. Review the policy carefully especially if it
is written on a non-admitted basis.
Sharing the coverage differences with customers that are changing
policies and documenting this in the customer file can help avoid future
E&O claims. In addition if a
customer chooses a non-NFIP policy and they decide they want to come back to
the NFIP in the future, they might not be able to take advantage of some of the
special rate considerations because of the lapse in continuous coverage. Agents should be aware of these potential grandfathering
issues.
The Big ‘I’ national association and 48 state associations
endorse flood provider Selective Insurance Company. As such, they are the only WYO carrier whose
flood premiums from Big ‘I’ members help fund the work done by your Capitol Hill
office to help improve the program. For
more information or to move some business to the program, visit www.iiaba.net/flood.
David Hulcher is AVP
of Agency E&O Professional Liability Risk Management for the Big “I”
Professional Liability Program. Visit
the E&O Happens website
for valuable agency E&O risk management information and tools.
