Policy checking – a key final step when moving coverage

Consider the following E&O scenario: An agency looks to move one of their accounts from company A to company B. In the placing of the coverage with company B, one of the coverages (that was on the company A policy) does not get included. A loss occurs involving that “missing” coverage. Who is probably going to be found ultimately responsible? In all likelihood, the agency for essentially moving the coverage but not verifying the same coverage was being put in place.

In reality, this E&O claim scenario is occurring with alarming frequency. Coverages such as extra expense, physical damage on a commercial vehicle and a fine arts schedule (such as jewelry) are being omitted. How can it be prevented?

There are obviously multiple steps where the issue of “duplicating coverage” should be verified including the initial marketing of the coverage as well as at the time of the proposal. In addition to those two steps, a final review of the policy before delivery should be performed.

When the policy has been received from the carrier, it needs to be reviewed to ensure that everything is in order. I have never had a single agency exec advise me that every policy they get from their carriers is perfect. The average seems to be around 1 out of every 10 policies contain an error. So mistakes are occurring!

While the policy should be reviewed based on what the proposal stated, it is vital a comparison to the policy it is replacing be done. It is important the focus not be just on the coverages noted on the dec page as there will probably be coverages within the policy that should be reviewed. The entire policy should be reviewed.

Many agencies have developed a policy review checklist to verify the coverage is what was ordered and what the client requested. The person performing the review should be required to note in the system that the review was completed, when it was done and what was found.

The entire issue of the moving of coverage from one carrier to another (commonly referred to as the Mirror Test) is one of the more significant areas generating E&O claims. There is no doubt that taking the necessary time to review the policies before they are delivered might just catch some of the “errors”.

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Could you be guilty of “over promising?”

There is no doubt the insurance agency world is highly competitive with agencies always looking to position themselves in a more favorable light. For this reason, some agencies tend to stretch the truth or over promise what they can deliver. They include certain statements in their promotional material or on their website that sound very positive and have the potential to generate some additional sales. Unfortunately, some of these statements may not be true.

So what’s the problem with this? I remember many years ago when I was at the agency side of the business when the agency owner intentionally mislead a customer on how their insurance would respond in the event of a claim. When I questioned him on it, his response “they will only know that I didn’t know what I was talking about if they have a claim and what are the chances of that”.

The problem with “over promising” is that your customers are relying upon the information you include in your written promotional material or your verbal words. If they have a problem and can refer to conversations or written materials (such as proposals or promotional material) to their benefit, they may have grounds for some type of legal action against the agency.

When was the last time you thoroughly reviewed your promotional material and your website? Does it include words such as “expert” or “specialist” or statements such as “we will make sure that you have the proper coverage to protect you in the event of a claim”? Those sound very positive but they also have the potential to raise the standard of care that your agency would be held to. Also are they true or are they simply marketing fluff?

Every agency should have a point person that has the overall responsibility of developing the agency promotional message and since things could change, this message should be reviewed at least once a year.

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Enhancing your job descriptions

When one thinks of job descriptions (or position descriptions), typically the material includes issues such as: 

Job Title and pay grade, hours, etc.

Summary of the objective of the position including key tasks, relationship with customers, etc.

Qualifications required

Special Demands

Job Duties (essentially those tasks that involve the majority of the work to be performed)

ADA Compliance

One area that probably should be included relates to the expectations of the employee on E&O related matters. Hopefully every agency has expectations of their staff on issues such as documentation, handling of exposure analysis checklists, use of standard proposal templates, management of suspense items, etc. These expectations should be spelled out in the form of a document. If your agency does not currently have a document detailing these expectations, it is heavily suggested to put one in place quickly.

Unfortunately, just because an agency has the expectations spelled out in a document, this does not always translate into 100% compliance by all staff members. This is why the job descriptions should include a statement such as: “The employee is responsible for adherence to the agency’s stated E&O expectations”. The adherence to these expectations should be factored into the performance grade and thus for those employees meeting the expectations, they will receive a benefit of some type.

There is certainly the possibility that this type of an approach will “motivate” some staff to meet the E&O expectations to a higher degree. However, if the employee does not want to cooperate, the inclusion of the E&O expectations in the job descriptions gives the agency some teeth if some disciplinary action is necessary.

Bottom line, agencies need their staff to meet the E&O expectations as stated. By including a statement relating to this within the job descriptions may just increase the degree of compliance.

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Is your structure helping or hurting your E&O culture?

First, when I speak of structure, I am referring to the manner in which the agency and the staff within the agency are departmentalized. In other words, is the agency structured based on specializations or does the same person handle personal, commercial and claims for their segment of the alphabet?

In reality, there is no one structure that is right in every agency. The structure that exists today could very well be the same structure that the agency had 10 years ago. As staff leave / retire, they are replaced with staff that have the same responsibilities as the person they replaced.

When I started in the agency business in 1976, I was a CSR handling personal, commercial and claims for the S-Z alphabet split. I had actually just received my insurance license so essentially my level of knowledge was what the New York State license materials provided. I liked dealing with personal lines, absolutely loved the commercial lines segment of the industry but absolutely hated my claims responsibilities. Primarily my hatred for the claims side was that I never really received any training on how to handle a claim. In many respects, I was probably an E&O nightmare waiting to happen. Within 2 years, the agency totally changed their structure going with a personal lines team, a commercial lines team and a dedicated claims person. I was moved to the commercial side of the house. Boy was I relieved!

One of the keys to the “right” structure deals with the degree to which the staff is knowledgeable and proficient in their duties and responsibilities. Without the proper knowledge, this is when mistakes can occur with greater frequency. Another key issue is the workload and what priority the various tasks are performed. When someone is handling personal, commercial and claims, is there an area that will probably not get the level of attention it deserves? For me, it was definitely claims!

In many of the industry publications, the issue of specialization is getting a significant amount of attention. There are many advantages to this including more in depth knowledge of the issues of the various specialties. This will probably translate into customers feeling more comfortable with the agency because of their perception that they are dealing with staff that knows their issues.

However, in many agencies, specialization is not possible. The agency wants to be a generalist and to be “all things to all people”. Many agencies are commonly referred to as “main street agencies” and are looking to write all of the different types of personal and commercial accounts their community represents. This is certainly fine and if the agency volume does not allow it, having separate personal and commercial lines staff may not be possible.

Probably the key for whatever your structure looks like is the degree that the staff is knowledgeable and proficient in their respective areas of responsibility. If the staff possess the necessary level of knowledge and have the ability to manage a diverse workload, whatever structure you choose will probably work for you. However this may be easier said than done!

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E&O commitment is actually a team sport

When I typically reference the issue of E&O commitment, I am addressing agency staff on more of a 1 on 1 personal level. After all, agencies don’t make mistakes, people do. Thus if each of the employees has a strong personal commitment, the result at the end of the day should be positive.

But a personal commitment is actually more than just the commitment that a person is making to themselves. An E&O culture and commitment is similar to a team sport. If each person is doing their part for the benefit of the team, a good result should occur. Inherent in a team sport is the commitment that each of the team members is making to each other. A commitment that they will do their best to perform the expected job in the manner in which they are being asked.

For example, take a team sport where one member of the team just doesn’t want to abide by the rules and expectations. There is a good chance that the team will eventually suffer and not achieve the success that they desire. The same is true with agency staff. If one of the agency staff does not perform their duties in the prescribed manner, the potential for success has been greatly reduced. In some of my other blog postings over the years, I have used the analogy that an E&O commitment is like a chain and thus only as strong as its weakest link.

So when thinking and performing the expected duties within the agency, one should think of more than just themselves. They should also be factoring in the commitment that they have to their fellow team members. When this happens, in the world of E&O, this means that the potential for an E&O claim has been greatly reduced.

Make E&O commitment a team sport in your agency!

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Number of Dog Bite Insurance Claims Falls But Average Claim Rises to $37K

As noted in the attached article, written by Emma Orr, that appeared on www.insurancejournal.com on May 12, 2016, the issue of dog bites continues to be a major issue facing the insurance industry. Are all carriers addressing this issue in the same manner? Probably not and thus, it is important for agencies to know how their carriers are addressing this issue.

“The cost of dog-bite claims for U.S. insurers climbed 16 percent last year on higher medical expenses and larger settlements to resolve court disputes.

The average claim increased to $37,214 in 2015 from $32,072 a year earlier, according to the Insurance Information Institute, an industry group.”

Continue Reading Number of Dog Bite Insurance Claims Falls But Average Claim Rises to $37K

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How good is the “hand off” in your agency?

Although I am not a big track & field person, it is certainly hard not to appreciate the intricacies of many of the events and how timing and execution are, oftentimes, the key differentiators between winning and not winning.

One of the key events is the 4 x 100 relays. Without a smooth transition / handoff from one of the team members to the other, the chance for success has been greatly diminished. In actuality, the same applies to the insurance agency / brokerage world. When a producer has been successful in landing a new account, the manner in which they “hand off” the account to the service / support team could determine how well that account is serviced and how satisfied they are with their “new agent”.

Some good rules of thumb to consider that should generate a better “hand off”:

- During the sales process, it might prove beneficial for the producer to provide the prospect with access to / knowledge of the support team who would have the responsibility of ensuring that the overall service needs of the customer are met.

After the account is bound, the producer should meet with the team that will be providing the ongoing service to the client to get everyone up to speed.

- Have a couple sets of eyes to review the policies to ensure that they reflect what was agreed upon. The policies should then be delivered to the client by the producer or someone they designate in a timely fashion.

- Educate the team on the details of the account and their various exposures. If the account generates a fair number of claims, the claims staff should definitely be included.

- Provide the team with the details of the personnel of the client that the agency staff will be interacting with.

- Provide the specific expectations of the customer. If they had a poor dealing with their prior agent, the agency team should be advised of this issue and the need to meet customer’s service expectations.

- The support staff should be aware of any agreements made by the producer to the client that were key to the agency landing the account. This may involve issues such as when certificates will be provided. Since the service team is probably going to be the one that needs to honor these agreements, they need to be aware of them.

- Any open items that need to be followed up on down the road.

Taking these steps should ensure that the client is provided the service that will ensure that they stay a customer for the foreseeable future. Without a smooth handoff, things will fall thru the cracks which could result in an E&O claim at some point.

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Agency claims handling is generating E&O claims – What’s up with that?

When agencies typically think about their errors-and-omissions exposure, they tend to focus on their producers and CSRs. Yet there are other areas within an agency operation with the potential to generate E&O claims from time to time.

One of those areas involves the handling of customer claims. The latest statistics indicate that approximately 10 percent of all E&O claims are due to alleged mishandling of the underlying claim by the agency. Some of the areas where things could go wrong include:

Notifying all applicable Carriers – Virtually every agency has experienced a claims scenario where a minor liability claim suddenly became a significant loss. That “small fall down” claim or “minor auto claim” might seem harmless initially, but because these claims could develop adversely, a good “best practice” is to advise all applicable carriers, including any excess or umbrella carriers. Handling the claim like this provides all applicable carriers the opportunity to conduct their discovery on the matter. When a claim is submitted to your agency, make it a practice to review the file for all possible available coverage, and then put those carriers on notice.

It is best to advise the client that your agency is going to proceed in that manner. If the client does not want the excess carriers put on notice, be sure to have this discussion memorialized in a document between the agency and the client.

Improper Denial – The scenario: a claim is reported to the agency. Your agency concludes there is no coverage after reviewing the details, so the claim is not reported to the carrier. While some of these instances are minor, more than a handful are serious. What should an agent do? Even if you are completely convinced there is no coverage, report the claim to the carrier anyway. A claims denial should be the carrier’s responsibility. 

Improper Coverage Interpretations – While we all pride ourselves on our insurance knowledge, it is difficult to be the “expert” on all lines of business. When claims/incidents are reported to your agency, it might be appropriate to contact the carrier for a coverage determination. This applies to all coverages, especially professional liability/D&O which have unique language that could determine the trigger of coverage.

Most agents want to be involved with customers’ claims as it provides the opportunity to demonstrate you are there when customers need you. Claims handling is a significant issue and needs to be handled as such. History has shown that missteps can cause some problems leading to an E&O claim.

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Include HR when developing your E&O culture

When one thinks of the key elements and steps in developing a strong E&O culture, I am not sure how much the Human Resources element is factored into the equation. More often than not, the areas that deal directly with the public in sales or servicing get the most attention. However, since “agencies don’t make mistakes, people do”, wouldn’t it make sense for the division that is heavily involved in the selection and training of staff be included?

To build an effective team of working insurance professionals, management of the human resources of the firm is extremely important. The HR division (or those that have this responsibility) plays a key role in whether the firm meets its objectives and achieves the desired success. Some of the key areas where Human Resources should have their hand in the process:

-         The development of job descriptions. Since the objective is for the staff to “do their job”, wouldn’t it make sense that there be a document that essentially advises them what their job is?

-         An effective means to ensure that the firm is properly staffed with qualified individuals.  The success of an insurance agency is going to largely be determined by the level of execution of the agency staff. As Jim Collins stated in his book Good to Great, “Get the right people on the bus and the wrong people off the bus”. Bottom line, having the right people heavily determines the success of an agency.

-         Training of the staff is EXTREMELY important and the training should be ongoing. The insurance industry is constantly changing and the agency should have programs in place to provide the staff with the knowledge and skills necessary.

-         Last but by means least is the issue of performance appraisals. These should be done at least annually and should contain goals for the following year that enhance the overall E&O culture of the agency. If the agency is performing internal auditing, the individual’s audit results should be factored into their review.

The Human Resources area in an agency is one that is often overlooked as to the impact they can have on the E&O culture of the agency. Don’t under estimate the impact they can have on taking the agency to the next level of E&O commitment.

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Internal communication is key

As I work with agencies around the country, a review of their most recent audit results in typically part of the agenda. From my perspective, audit results often provide a tremendous insight into an agency / brokerage firm. They tell me a lot about the firm and the professionals that make up the various divisions of the firm.

Recently, I had the honor to work with a specific division of a firm whose audit results were off the chart. In virtually every single area of the audit, which covered the sales cycle from beginning to end – exposure analysis to policy checking, etc., the results were exemplary. To better understand the primary reasons why the results were so good, I posed the question, sat back and listened.

What I heard was very detailed and impressive. It was very evident that the staff in this division liked working with each other and they had the ultimate praise for their manager who “walked the walk and talked the talk”. For this reason, the staffing was very consistent with minimal, if any, turnover.

They were proactive in identifying ways to be more responsive and efficient. The staff was heavily driving this review and they knew they had a manager that would consider their findings.

Education of the customer was extremely high on their radar. In fact, the statement that “our best customer is an informed customer” was often used. They clearly knew that education of the client would not only reduce their E&O exposure but would also generate solid sales success. And yes, this division consistently hits their sales goals.

Actually, their very first response to my question “why are the audit results so good” focused on communication. Among their comments was the statement “we are very big on communication – both internally and with our customers”.  This was a very astute observation and one that probably does not get as much attention as it should.

A very common approach is thru staff meetings; meetings in a conference room with an agenda of topics to discuss. Staff meetings can be an extremely productive use of time. The goal is to educate the staff on a multitude of various issues that can include a change in a carrier’s underwriting guidelines, a new procedure, or discussion on a specific topic for educational purposes. Using a staff meeting to communicate this key information provides a much more focused environment where you have a better chance of having the staff’s full attention.

Education should be a strong focus of the staff meetings. They also provide a great opportunity to stress key agency practices, such as the agency’s specific expectations of professional, thorough and timely documentation not only in the agency file but also with written documentation back to the customer when appropriate. Staff meetings provide a clear and consistent message to all members of the agency.

What is the level of internal communication within your agency? Enhancing it just might be the key to taking your agency to the next level.

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