By Richard F. Lund, J.D., Vice President, Senior Underwriter, Swiss Re Corporate Solutions*
Around my favorite time of year, Halloween, there are a lot of television shows and internet articles about scary things. It made me think that as an insurance agent errors and omissions aficionado, what is it that scares me and, in turn, what should scare YOU?
Virtually every claim that is made against insurance agents ultimately comes down to an unpaid underlying claim. Whether it's an automobile loss, a personal injury loss, a commercial property or liability loss, or whatever the situation is, ultimately it's the failure to properly place an insurance coverage that results in financial damage to your customer. While there are many nuances and other things that can lead to this event, the ultimate result is someone has been financially disadvantaged. And then the scary part happens: They make an errors and omissions claim.
From an E&O standpoint, as you go about your daily routine, be mindful of what you are doing. You probably have a lot of thoughts about the various customers you have and their needs. You mentally try to prioritize how you will respond to them. With everything else going on, you may forget exactly what it was you were thinking about when you first were contacted by the customer, and what it is that you wanted and needed to do for them. So how do you put your mind at ease and know that you are doing the right thing for them?
One word: consistency.
Consistency starts the day your agency opens. Or the day you first go to work at an agency. Or when you take over an agency from another agent. If you start from day one with consistent practices, the chances of you doing things correctly every time increase. And the odds of you doing something wrong and committing an error or omission are greatly reduced.
Agencies that develop operational procedures and require all staff to consistently use them will be less likely to have an E&O claim. Being consistent in your hiring practices also applies. You know the types of employees you want, so make a checklist of questions that will help you learn about their insurance experience. And the same is true with using coverage checklists. By consistently using a coverage checklist, you eliminate the likelihood of forgetting to offer a coverage, limit or deductible option. Consistent claims reporting procedures is also very important. Whether you are a one-person operation, or a 10-, 50- or 200-person shop, having consistent operations for everyone will lessen the risk of an E&O claim.
Without consistent operational procedures, everyone in the office could be operating on their own, and when that's the case, scary things happen. If one person does things one way, and another does them another way, and yet another person does them a third way, the chances for an error have multiplied. We've all heard the phrase "the right hand didn't know what the left hand was doing." That's what happens when consistent practices are not followed.
The best examples are deposition questions that are virtually always asked of agents when litigation ensues after an uncovered claim. The plaintiff's attorney will invariably ask: "Did you?" and then go on to state the exact thing that they know the agent DIDN'T do. But if that agent had a consistent practice in place before the claim happened, the agent would not have to think, "Did I?", but rather would be able to say, "I DID!!!" If you can answer that way, then you may not even be in the situation where your deposition must be taken, because there won't be any error in the first place. And then you won't have a reason to be scared.
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.
*Richard F. Lund, JD, is a Vice President and Senior Underwriter of Swiss Re Corporate Solutions, underwriting insurance agents errors and omissions coverage. He has also been an insurance agents E&O claims counsel and has written and presented numerous E&O risk management/ loss control seminars, mock trials and articles nationwide since 1992.
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