Many of the today’s E&O classes will advise agents that they should be advising their customers every year of the availability of coverages such as Flood / Umbrella / Earthquake / Building Ordinance, etc. So what happens if you offer it 4 years in a row but don’t offer it the 5th year?
This is actually the exact scenario that occurred in Florida a number of years ago. The agent offered their client the availability of a personal umbrella 4 years in a row. Each time, the customer essentially said “No thanks”. In year 5, the agent is probably thinking “why bother offering this year, he is not going to buy it”. So, the umbrella is not offered. As luck or fate would have it, year 5 is the year when the customer’s son gets into a major auto accident and the underlying auto limits are not sufficient to pay for the injuries / damage, etc. The customer then brings an E&O claim against the agent for not offering the umbrella coverage in year #5. The case goes all the way up to the state’s Supreme Court. At the end of the day, the agent prevailed in the litigation.
Is this going to be the outcome each time? I would hope so but that is definitely difficult to predict.
So what coverages should be offered and how many times should the offer be made? This is a tough set of questions for which there is no perfect answer. I know some defense attorneys that would argue that all possible coverages should be offered each year. At this point, you may be thinking, how is this even possible? Actually it is!
Agents can, and many actually do, include in their proposals the availability of additional coverages, whether the account is a personal lines account or commercial lines. This is great but personally I think that there is another approach worth considering. This involves the mailing of some type of a checklist that addresses available coverages and also looks to update the customer’s exposures. The checklist is typically designed to bring to the customer’s attention various exposures that they may face and to ask the customer 1) whether they have that exposure and 2) if so, do they have coverage for that exposure. Some of the checklists that I have seen include questions dealing with home business, umbrella, building code changes, flood, earthquake, collectibles, etc. The agency can request that the customer complete the form and return it or to advise the customer to contact the agency with questions or to arrange an account review.
The goal / benefit of this approach is to educate customers on additional coverages that are available and the desire to interact with those customers to discuss how their current insurance coverages work and some potential gaps.
Let’s assume you mailed it but the customer never returned the form or never contacted the agency. Has this been a waste of time? No. The fact that you offered the review would certainly help in the agency’s defense in the event of any E&O litigation. Essentially, in most jurisdictions, an agent is considered an order taker…thus it is up to the customer to request the coverage. If you bring to the customers attention the issue / availability of various coverages and they don’t advise you of their interest, this could help in the defense of the agency should that customer suffer a loss where there was no coverage or where the limits were not sufficient.
Look to use technology to accomplish this task. Develop a checklist and then do a mail merge with your system. This way you could easily send a checklist out to each customer each year. At the end of the day, it could just make the difference !