Using technology? That's a given in today's world. The advent of technology in the daily operations of insurance agencies has, in most cases, simplified tasks and created a more efficient workflow. However, sometimes the use of technology gets agencies in trouble and can give rise to E&O situations.
More and more, applications are received by insurance carriers not via the mail, but rather, through the carrier's captive, web-based direct entry program. When using such systems, the agency needs to be familiar with how each carrier's program works. For example, in the case of applications, is there a default setting that completes certain items when the agency is entering an application for a client? If so, the agent needs to ensure that the default response is the correct response. If the program pulls information from a prior application, has that information changed?
Sometimes the carrier's system will automatically decline an application in response to particular answers. If so, the agency needs to make sure its employees are trained not to simply change those 'objectionable' answers just so the application goes through. More than $2 million was paid on one claim where the initial application was rejected, so the agent simply changed the answer so the application would be accepted.
Does the carrier's system confirm when an application has been fully submitted? Did the agent print out the application and make a notation of the confirmation? We see claims where the agent entered client information into the system, but apparently never completed the process. A related error: the broker is certain that the application was submitted, but there was no follow up to be sure that it was received. If the carrier's system does not provide automatic confirmation of receipt, the agency needs to put into place a manual follow up system. If not, the agency could be faced with a situation where there is a client loss, but no policy in place to cover that claim. A substantial number of claims result from just a few days of delay, so timing is important.
If the agency is entering information into a carrier's system using answers from a handwritten, signed application, there should be a review to be sure that the electronic version matches. If there is no separate handwritten application, is the submitted application printed out and signed by the customer? If not, the client can – and often does – deny that the information typed into the system by the agency tracks what it was told by the client.
One advancement in this environment is the use of electronic signature software that is password protected. With these programs, the agency will receive information regarding the date, time, email address and IP address of the recipient once the application documents are emailed to the client. They will also record the date, time, email address and IP address of the sender once the client electronically signs the application and any attached forms such as UM rejection. In the face of this evidence, it is very difficult for the client to claim that he did not sign or receive the documents.
Completing and issuing certificates of insurance is surely easier with technology, but care needs to be taken to ensure that the information on the certificates matches the current status of the policy information requested. We have seen multiple claims where certificates have been issued showing coverage was in place after a cancellation had already taken effect. In some instances certificates are automatically issued with default language indicating that a party is an "additional insured" only to find – after a loss -- that there has been no request for an additional insured. In others, there is a limiting condition, e.g., a contract needs to be in place in order for a party to be an additional insured.
Hopefully, agency management systems that include agency notes and attachments provide an easier way to fully document what the agent is doing. More and better documentation will usually assist the agency in defending an E&O claim. However, agency notes can get the agency in trouble if the agent places comments in the file that are not factual or that provide opinions on coverage.
Last, but not least, when using technology agencies need to be sure they are protecting the privacy of their clients' personal information. Every agency should know what constitutes 'personal information' and should employ systems that protect such information from exposure to third parties, e.g., using encryption, password protection and a confidentiality warning on emails. The agency that does not keep its client's information private could be subject to fines, remediation costs, civil actions and damage to its reputation.
Technology can be a valuable tool, enabling agencies to perform their work faster and more efficiently. But like most tools, technology is susceptible to human error. Insurance professionals and their staffs still need to think about how and when they are using technology in order to anticipate and avoid possible E&O situations.
Caryn Mahoney is an assistant vice president, claims specialist with Swiss Re Corporate Solutions and works out of the Chicago office.