Switched On
How to avoid the pitfalls of switching
carriers. John's
client, Dave, called him with a common concern. He was paying too much for
his auto insurance and his policies were coming up for renewal. While Dave
was concerned with price, he wanted his $1-million umbrella policy in force
to protect him from any catastrophic accident. After conducting a market
search, John found a primary auto policy with a different carrier, saving
him 25%. Both men were delighted and the switch in carriers was made. Six months
later, Dave was in a serious at-fault accident where the other driver was
killed as a result of Dave's negligence. Both John and Dave were astonished
to learn there was a problem: The prior auto carrier policy contained
limits of $500,000/$1 million while the new primary automobile policy
contained limits of $100,000/$300,000. The umbrella policy had an
attachment point of $500,000. There was a $400,000 gap. Dave had a $400,000
personal exposure and John immediately put his errors & omissions
carrier on notice. When an
agent is tasked with switching carrier, failing to match the terms and
conditions of the old policy could result in catastrophic consequences for
the client and a big E&O claim for the insurance agent or broker.
However, obtaining duplicate coverage contains numerous pitfalls. Policy
language can and will vary from carrier to carrier. In return for lower
premium, the new carrier could impose more restrictive policy language or
endorsements. And, even if the policies are quite similar, there are often
slight nuances. Agents
should refrain from promising to get the same policy. Advise the client
that you are shopping for coverage and will provide the customer with
quotes for “similar” policies. If the client has expressed an interest in a
particular type or amount of coverage, ensure that is obtained or advise
the client in writing if it is not. Additionally,
ask the client to complete a new application rather than copying from an
old one. This is especially important with auto coverage where you are
insuring different vehicles and drivers. If the application is submitted
electronically, print a copy and make sure the client signs it. If there
are questions about whether the new policy mirrors the old policy, get
answers in writing from the underwriters. If the discussion with the
underwriter takes place telephonically, follow up via email to confirm your
understanding. Make sure you clear up any confusing areas with the
underwriters, taking care to document their responses in an email or letter
to the underwriters and client. Send the
new policy to the insured with a cover letter, advising them to read the
policy and contact you with questions. Carefully document your work. These
simple steps should help to cut down on the number of E&O issues
surrounding this common and important aspect of day-to-day work.
Brian
Butcher is vice president and claims expert at Swiss Re Corporate
Solutions, working out of the office in Kansas City, Missouri. Insurance
products underwritten by Westport Insurance Corporation, Kansas City,
Missouri, a member of Swiss Re Corporate Solutions. 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.
Look, A Useful Chart!
Policy
change errors account for the 3rd largest percentage in total claim count and the 4th largest percentage in
total loss amount. | 
