Follow the Leader: Reducing E&O Exposures from the Top
Most of us think we have a pretty good idea of what a good
leader looks like in action. We may be hard-pressed to define
leadership, but we're proud members of the, 'I know it when I see it'
school of thought. That's okay. Sometimes it takes a 'rocket scientist' to
put his finger on the painfully obvious, such as when Albert Einstein
commented that "Setting an example is not the main means of
influencing others, it is the only means."
That advice is as true today as it was in Einstein's time.
If you want the next generation of your agency to find the path to success,
you will let your example show the way. Good habits can take many forms,
but a survey of our claim handlers highlighted five ways that they believe
will help reduce or prevent E&O claims by showing younger members of
your team how to do things the right way.
Standard Operating Procedures. Put 'SOPs' in
place and make it clear that everyone needs to follow the rules – including
you. Effective E&O prevention depends on having written
standards and procedures, as well as written minimum standards for writing
and servicing business. There should be a written procedure for every
workflow in the agency: new business, renewals, rewrites, policy changes,
claims handling, and cancellations to name a few. Thorough coverage check
lists should be in place, easy to find and mandatory to use.
Education. Our research has demonstrated
that 'continuing education' courses reduce E&O claims. For that reason,
everyone at the agency should participate in ongoing and meaningful
continuing education both to strengthen their knowledge of the products
offered by the agency and to develop in-house expertise – and they should
see you sitting front and center, taking notes. Additionally, continuing
education should not be limited to substantive insurance topics, only,
because everyone on your team needs to have a solid understanding of the
agency management system so that they appreciate its importance. Finally,
let your employees know that you, as an owner or manager of the agency, are
always ready to learn something new. After all, given the dynamic nature of
our business, the insurance professional who stops learning doesn't stand
still, he falls behind.
Documentation. Good documentation can save an
agency in a bad situation. We know, we've seen it time after time. To be
effective documentation has to be timely, detailed enough to capture both
the essence of what was said, and should be reduced to writing
contemporaneously by the person closest to the matter. All documentation
should be kept in the same place and readily accessible to everyone who
works with the account. It should also be clear and easily understood so
that it paints an unambiguous picture of what was offered to the client and
how he responded. A good example: when customers reject the coverage you
have offered you should have them sign a rejection form and to keep it in
the customer's file.
In our experience this piece of advice becomes harder to
follow the longer you've been in the industry for at least two reasons.
First, you think that you've worked with this customer long enough that
they would never make a claim against you, but years of data tell us you're
wrong. Some of our worst claims come from our most experienced agents and
their longstanding customers. Why is that? Because the years have taught
you what your customer will and will not purchase, so you have grown
accustomed to telling them what they want to hear, rather than what they
need to know. Show your new agents that persistence and courage in the face
of customer impatience go a long way towards preventing E&O claims (and
can also increase sales).
Consistency.Improvisation is a great way for
comedians to do business, but bad for insurance agencies. If your agency
finds that a particular process works you should do it consistently.
Incorporate it into a mandatory check list so that it is not forgotten. A
simple example of this is following up with clients when their premium
payment is due or past due. By following up with a client one time
concerning an impending cancelation for non-payment, the agency arguably
has created a duty to follow up every time there is a similar
Take the situation where the agency has a client who has
always made its homeowners insurance payment, but is often late, so the
agency sends reminders of their payment each time. If the agency neglects
to send a payment reminder the policy may end up being canceled for
non-payment because the customer has grown accustomed to your reminder.
That good deed does not go unpunished, because, when the – now uninsured --
house catches fire and burns to the ground, the customer inevitably files
suit against the agency for its negligent failure to notify them that their
payment was due. Worst of all, the agency's own file will make the
plaintiff's case for him.
Self-Audit. Doing a self-audit will reveal
both good and bad: where the agency's procedures are working as well as the
areas that need renewed focus internally and thru continuing education.
Review procedures, forms and documents and conduct an overview of the
agency's procedures with key managers or supervisors. No one at the agency
should be exempt from the audit as we all make mistakes and can use them as
learning experiences. As important: listen to every voice when it comes to
making improvements. Every employee should feel that his insights are
valued -- and with good reason: sometimes it takes a fresh set of eyes to
see an old problem.
Striking much the same note as Mr. Einstein, philosopher and
physician Albert Schweitzer once observed that, "The three most
important ways to lead people are: ... by example... by example... by
example." It seems pretty clear that the next generation is bound to
follow your lead. The question is, what kind of example are you setting?
This article is intended to be used for general informational
purposes only and is not to be relied upon or used for any particular
purpose. Swiss Re shall not be held responsible in any way for, and
specifically disclaims any liability arising out of or in any way connected
to, reliance on or use of any of the information contained or referenced in
this article. The information contained or referenced in this article is
not intended to constitute and should not be considered legal, accounting
or professional advice, nor shall it serve as a substitute for the
recipient obtaining such advice. The views expressed in this article do not
necessarily represent the views of the Swiss Re Group ("Swiss
Re") and/or its subsidiaries and/or management and/or shareholders.
Copyright © 2018, Big "I" Advantage, Inc. and
Westport Insurance Corporation. All rights reserved. No part of this
material may be used or reproduced in any manner without the prior written
permission from Big "I" Advantage. For permission or further
information, contact Agency E&O Risk Manager, 127 South Peyton Street,
Alexandria, VA 22314 or email at firstname.lastname@example.org.
Mark Heimsoth is an assistant vice president, claims
specialist with 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