Little Dabble May Do In Your Agency
Whether it's to please a large account, appease a family
member or an attempt to diversify their business, many insurance agents
agree to place coverage that is either outside their expertise or their
geographical comfort zone. Due to their lack of expertise or lack of
knowledge about the area where they are placing coverage, these agents are
at risk of committing an error. This is a dangerous practice because, to
paraphrase a famous ad campaign: 'A little dabble will do you in.'
We have seen claims where a large agency customer purchases
their own airplane, a summer home on the coast or even a yacht. The
customer asks their agent to procure coverage for the new acquisition and,
while the agent is not comfortable placing the coverage, they are even less
comfortable sending their prize customer to a competitor for the coverage.
Instead, they muddle their way through, obtaining what they believe
is the coverage their customer needs.
Not until a loss occurs is the coverage flaw discovered:
- The owner/pilot of an
airplane did not meet the qualifications required in the policy.
- The agent failed to
realize that the homeowner's policy procured for a coastal home does
not include wind or flood coverage.
- As for the yacht now
located on the bottom of the Gulf of Mexico, it had a docking
restriction: within 100 miles of the owner's address ... which the
policy lists as Indiana.
In each of these actual examples our insured agent
had to go back to a large agency customer and explain why there was no
coverage for their loss. Not uncommonly, agents lose their largest accounts
over dabbling mistakes because those are the very customers they will never
refer out for fear of losing the business – thereby causing the very
outcome they feared most.
Another common dabbling error we see is when an agency or
agent decides to expand their book of business by branching into a new area
of coverage. In an attempt to broaden their footprint, the agent will
approach potential customers who require coverages of which our insured agent
is unaware. In these scenarios our insured agents have failed to procure
pollution coverage or hired- and non-owned auto coverage just to name a
couple of examples.
The common thread across most of these claims: when there is
a loss, the missing coverage is so obvious that we are unable to find an
expert witness who will say our insured agent met the standard of care. The
damages are often high and the impact of the claim on the agency is
The good news is there are ways to lessen, or even avoid
these dabbling errors. When placing a type of coverage for the first time
an agency can go through a broker, who is knowledgeable about the type of
coverage. While the agent must split the commission with the broker, they
can look at the cost as paying for an education and also buying some peace
of mind that the correct coverage is being obtained.
Another good source of information is the Big I's
"Virtual University", which is full of white papers, articles and
checklists for multiple types of coverage anda in many geographical areas.
Or if you have a specific question you can use the Big "I"'s
"Ask an Expert" for help.
Remember, as a member of the Big I family you have a wealth
of information and expertise at your disposal for no additional charge,
starting with this simple piece of advice: even a little
dabble is too much.
Jim Redeker is
vice president and claims manager at Swiss Re Corporate Solutions and works
out of the office in Overland Park, Kansas. Insurance products underwritten
by Westport Insurance Corporation, Overland Park, Kansas, a member of Swiss
Re Corporate Solutions.