Is everyone in your agency handling claims the same way?

As I have reported numerous times over the past number of years, the handling of claims is and continues to be a major issue and cause of E&O claims. Some E&O carriers are reporting that upwards of 1 in every 6 E&O claims are the result of improper handling of customer claims by the agency.

When I started at the agency side of the business in 1976, I was a CSR handling S-Z for personal, commercial and claims. While I thought I was technical proficient on the personal and commercial issues, in all honesty the claims handling scared me to death. I actually used to dread a customer calling in to report a claim. When one considers that this is one of the key areas where the agency can show their value, my lack of confidence handling claims was definitely not a good thing. When I look back at those days, my lack of confidence was probably heavily due to the lack of training and guidance that I received on the proper way to handle and manage customer’s claims.

Some agencies now have a dedicated claims person and this is certainly a positive step. However, since most agencies provide vacation for their employees (I hope so), what happens when the claims person is on vacation? How are claims handled? I doubt that customers are advised to “call back next week when our claims person is back from vacation”. Obviously during these times, other staff (account execs, etc.) are now put in a position to handle those claims. Do they know what they are doing and are claims being handled in the same manner as the claims person? 

To address this situation, agencies should look to develop a claims procedure manual that speaks to the proper manner and procedure for handling first and third party claims. What adjusters should be assigned and when, what if there a question on whether there is coverage, when to put the excess carriers on notice on liability claims, what do I document in the system? There are just some of the issues that need to be clearly addressed in the claims procedure guide. Without a guide, employees may fumble their way around the handling of a claim. When this occurs, the potential for a mistake or “error or omission” increases dramatically.

If your agency does not have a claims procedure guide, look to develop one over the next couple of months and then meet with any applicable staff that may be faced with the task of handling a claim to get them trained. I sure wish the agency that I worked at had this. I would have had a lot more confidence knowing that I was handling claims the proper way.

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What Agents Should Know About Flood Insurance Changes in Effect April 1

The following is an excerpt of an article that appeared on on April 1 regarding changes in the flood program.

“Starting today, when flood insurance policyholders go to renew their policies, they could be quoted premium increases ranging from 15 to 18 percent on average if their home is their primary residence and up to 25 percent if it is a secondary home or a home that has suffered repetitive losses.

They will also face new surcharges, $25 for primary homes and $250 for all others including secondary or multi-families.

About one million of the more than 5 million federal flood insurance policyholders will be affected by the increases.”

Continue Reading What Agents Should Know About Flood Insurance Changes in Effect April 1

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Are you including this procedure when you replace coverage for a client?

For many agencies, this happened once or twice (or more) this past week. Regardless of the insurance cycle we are in, every agency has customers that are extremely premium conscious and don’t want to pay more for their insurance than they have to. When this occurs, agencies may be forced to remarket the account. When your agency remarkets the account and finds a carrier with a lower premium, what is the possibility that the premium is less because the coverage is less?

The key issue is that as you look to move the account from Company A to Company B, if the coverage with Company B is not as broad as Company A, are you (and if so how are you) bringing the differences (more so the reductions) to the client’s attention and securing their signoff? Many E&O carriers feel that this is one of the top issues that is generating significant E&O activity.

Let’s presume that you moved the account to another carrier where the coverage was not as broad in some areas. The client subsequently suffers a loss that would have been covered by Company A but was not covered or not fully covered by Company B. If this were to happen, there is a tremendous possibility that the client will question your agency on why the coverage was moved. There is a good chance that the client will say that they wanted to save money but they were not looking to give up coverage. Bottom line, they may take the position that they never would have approved you moving the account if they knew they were giving up coverage.

There are many possible areas where the coverage / program could be different. The more common include the following: sub-limits, the actual coverage grant, specific endorsements, definitions for areas such as “who is an insured,” what is excluded on one policy compared to another, and the financial rating of the carrier. The issue is somewhat heightened with E&O policies as there can be tremendous differences from one carrier to another.

It is suggested to take all the carriers you are considering and put the details on a spreadsheet, noting the various pertinent issues. While this will take time, it is crucial to note the differences (at least the reductions) as simply moving the account and not advising the client of the differences could cause a problem down the road. It is vital that the customer see the differences so they can make an educated decision.

Be sure to secure the client’s written approval of their final decision. This documentation will be key if a claim occurs and your client finds out they didn’t have the coverage they thought they did.

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Internal Auditing – how is your agency handling the communication?

More and more, agencies are realizing the true value of performing periodic audits on their employees work product. Auditing is extremely healthy for an organization as it will help to identify any training needs or areas where procedures are just not being performed in the manner the agency prescribes. For those employees being audited, please don’t take it that your employer does not trust you. As former President Ronald Reagan stated, the approach and purpose of auditing is one of: “trust but verify”.

When agency management performs the audits, there are a couple of key issues to consider involving the communication / destruction of those documents.

It is best to provide the employee with the specific audit information in a paper format, asking them to respond to any areas in need of correction and to return the document. While some agencies look to provide this information electronically as it provides the information quicker and more efficiently (and allows any areas in need of correction to be handled quicker), there is an important to realize. In the event of E&O litigation, the downside of this approach is that the electronic communication is now discoverable whereas paper files can be destroyed.

Another key issue and suggestion is that the audit sheets should be destroyed after the audit results have been communicated and the matter resolved. This will ensure that problems on a file are not discoverable. Having audit sheets “hanging around” could certainly negatively position the agency / the specific employee if a problem were to develop.

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E&O Insights: Do You Have Clients That Will Be Buying or Selling?

This is an excerpt from an Insurance Journal article that I authored in the March 23, 2015 edition.

“While most agents are aware that mergers and acquisitions are hot topics in the world of insurance agencies, insurance is not the only segment of our industry affected. In many communities, hospitals, accounting firms, real estate firms and law firms also look to acquire, merge or sell. If your insurance agency is “the agent” for one of the parties, there are key insurance issues that will need to be discussed and could come into play. For virtually all businesses with a professional liability exposure, the manner in which the professional liability coverage is handled could make a significant difference on whether a professional liability “error or omission” is covered. Whether your agency’s client is the buyer or the seller, proper planning and attention to detail are extremely important.”

Continue Reading E&O Insights: Do You Have Clients That Will Be Buying or Selling?

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Ethics: is it the same as E&O loss prevention?

At one time, I wondered why many, if not all state insurance departments, didn’t allow an E&O class to count towards the state specific ethics requirement. After all, doing the right thing in many cases is both ethical as well as a solid best practice from an E&O loss prevention standpoint. However, actually it would appear that ethics (defined by some as the moral principles that govern a person’s or group’s behavior) is much more than E&O loss prevention and E&O loss prevention encompasses much more than ethics.  

There are some similarities however. Take for example, is it ethical to sign a client’s name to a document? I would personally not think so but maybe this issue is not as black and white as one might think. Signing a client’s name to a document is never suggested from an E&O perspective.

How about the situation where you, as the agent, stretch the truth in an attempt to get an account written with one of your carriers? I would be the first to state that this does not sound ethical at all and it is certainly not suggested from an E&O standpoint. Dealing with your carriers in a totally honest fashion sounds like it is both a solid best practices and also meets an Ethics “rule”.

However, not everything related to E&O loss prevention deals with ethics. As the agency CSR, if you don’t document the file noting the rejection of coverage from the client, have you breached some element of ethics? While this is a key E&O loss prevention issue, it does not really deal with an issue of morality. Is it wrong not to enter the information in the system? Yes but that does necessarily make it unethical.

Most, if not all, state insurance departments have rules / standards that they expect you to comply with that deal with ethical behavior. It is fair to say that just because you are measuring up successfully with the various E&O loss prevention best practices, this does not mean that you are complying and meeting your state’s ethical standards and rules.

So how well are the staff in your agency measuring up from an ethics standpoint? It is probably best for all to attend an Ethics class at some point to find out.

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The power of insurance periodicals

When you stop and think about it, I trust that you would agree with me that the insurance industry is blessed with a tremendous number of quality insurance periodicals. I regularly subscribe to 6 or so (some digital, some hard copy) representing both the P&C and Benefits sides of our business.

In any given issue, there is great material. In just the last two weeks, there have been articles regarding key issues that agencies need to be aware with HIPPA, the finer points of boat insurance, tools for account rounding, evolving insurance issues dealing with Lyft and Uber, social media pointers and a host of E&O tips (from a variety of solid E&O professionals).

The point for bringing this up is that whether the agency staff is brand new or of veteran status, every agency should have a solid focus on ensuring that the staff is educated on those issues affecting their specific responsibilities and the industry as a whole. These periodicals (many of which are actually free) are a very effective means to accomplish some of this education.

If you are not receiving these publications, now is a good time to start. As these publications are received by your office, do your best to peruse them promptly for articles that would be of benefit to your agency staff. While routing the publication through your agency is the easiest approach, at times, the periodicals may get “hung up” at a particular staff member’s desk. A better approach is to make copies for all applicable staff members – this will then enable them to retain a copy for their future use and as a resource.

The content of these articles also makes for great subject matter at your next agency staff meeting. Bottom line – there are many excellent authors that are contributing to these publications. They offer great suggestions on a whole host of topics (E&O, coverages, workflow, evolving topics, etc.). Make sure that these publications don’t just get put in a pile to read “when you have time” as this has the potential to deprive the staff of some great education and knowledge. Each of the agency staff will greatly benefit from this great material and when they grow, the agency grows. Oh, by the way, using the “tips” in these periodicals is going to help your agency sell more insurance!

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What do you want your reputation to be?

“If you tell the truth, it becomes a part of your past. If you lie, it becomes a part of your future” – Unidentified author.

Talk to most Agents E&O carriers about the type of E&O claims they experienced in 2014 and sadly, claims involving agents that were not honest with their carriers or their customers will not only be on the list but could very well be in the top 3.

For anyone reading this that subscribes to the position of lying to carriers or customers, please do our great industry a favor and find another job. Not only are you hurting the industry but as the quote above stated, you are hurting your reputation. As big as the insurance industry is, it is still a small industry and getting caught lying will affect you for the rest of your career.

Let’s face it – to a large degree, the relationship between your agency and your carriers is heavily built on honesty. The carriers are expecting that when you present a risk to them that the description of the risk is accurate. So as you look to complete the initial application for the marketing of the account, how confident are you that the answers to the questions are 100% accurate? Reviewing the information with the customer is suggested.

There have been a number of recent E&O claims that involved failure to accurately disclose risk characteristics associated with placements. Issues such as 1) negligent misrepresentation and 2) failure to disclose critical information are unfortunately common.

When the carrier comes back with some additional questions on the risk, as the producer, are you guessing at the correct answer or are you in fact getting the correct information from the risk you are looking to place?

What are the repercussions when the carrier alleges that your agency has lied on the nature of the risk? There are three common outcomes, all of which are not good.

- the carrier may rescind the policy, essentially returning any premium dollars. If there has been a loss and the carrier rescinds the policy, your agency could be held responsible.

- the carrier may pay the claim (if they don’t feel that the customer has been part of the lack of honesty) and then turn around and sue the agency. This has been happening for many years and it certainly seems that it is happening more often today.

- the carrier issuing immediate notice of termination of the agency contract. The carrier obviously feels that they can never trust your agency again. Yes, this is happening!

Oh by the way, you could also get fired and lose your license.

The Best practices that every agency sales person should adhere to:

Scrupulous attention to:

- Carrier appetite (especially as defined in their underwriting guidelines)

- Proper handling of applications

- Clear communication of risk characteristics

- Attention to detail

- Clear documentation of ALL conversations with customers / carriers / wholesalers

So what do you want your reputation to be? That’s your decision.

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Job Descriptions – how current are they in your agency?

Essentially job descriptions are designed for the staff to know what is expected of them and what their duties and responsibilities are. In addition, since professional development is extremely important for the growth of an agency, job descriptions should also address any licensing, professional development requirements and expectations. Bottom line, for an agency to have a strong E&O culture and commitment, there are many that will contend that it starts with having quality job descriptions for all levels within the agency.

Imagine an agency that does not have any job descriptions for the staff because the feeling is that the staff knows what they should be doing and what they are responsible for. Is there the possibility that staff members with the same title are doing things differently or have different ideas of what is expected of them? Most definitely!

One of the keys is that for the tasks and procedures in your agency, it is clear who is responsible for performing which tasks. The issues can include tasks such as the submission and follow-up on the marketing of accounts, identification of exposures, customer service requirements, the handling of certificates, etc.

The presence of job descriptions will be key when hiring new employees. As an example, the responsibilities of an account manager in your agency may be different than the same job title in the agency the employee came from.

These job descriptions don’t need to be complicated but they should contain sufficient detail describing the main aspects of the employee’s duties. There is no way for a job description to list all of the tasks and duties of a specific position, nor would you want that to be the case. This is the reason why there should be a degree of flexibility to all job descriptions. A statement such as “and any other tasks as assigned or deemed necessary” should be included.

Since change is occurring daily within agencies, job descriptions should be reviewed annually and updated based on the current job responsibilities and expectations. As job descriptions are updated, the staff should be provided the updated versions. It is suggested to keep copies of the older job descriptions for possible reference down the road.

From a legal aspect, certainly one of the keys is that without job descriptions, it will be more difficult to hold a staff member accountable for their performance or failure to handle certain duties.

If your agency currently does not have stated job descriptions, you are probably not alone. However that should not serve as any degree of consolation as the presence of job descriptions is a key step and component to ensure a solid E&O commitment and culture.

Bottom line: for employees to perform their job to the expectations of their organizations, it is critical that the employees be provided a document that provides a detailed overview of those expectations.

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How often is your agency having staff meetings?

First off, I am not talking about those informal meetings where the manager comes on the floor and asks everyone to gather around for a quick meeting. While those are necessary, it is debatable how productive they are since it is questionable whether you have everyone’s undivided attention. I am talking about staff meetings that are in a conference room and where there is hopefully 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. Since some agencies struggle with coming up with some topics, here are some to “chew on”. The following topics were those that a number of E&O carriers indicated as their hot topics and a primary cause of E&O claims in 2014:

- The Additional Insured issue. This has been one of the main causes of E&O claims for a number of years. There are a variety of available resources that will help staff to understand issues such as “Why blanket additional insured does not mean everyone is covered” and the issues associated with “completed operations”. The additional insured issue is also generating a number of E&O claims involving improperly executed certificates of insurance.

- The importance of doing a comparison when moving coverage from one carrier to another. This has been referred to as “the Mirror Test” and is a major concern of E&O carriers when coverage gets moved to a new carrier.

- The value and benefits of policy checking and prompt policy delivery.

- Why being honest with the carriers and wholesalers you are dealing with is of the utmost importance.

One final comment on staff meetings. They 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.

If your agency has not been holding agency staff meetings, start with once a month and see if it is necessary to conduct them with greater frequency. If you have been conducting but have not found them beneficial, look to “retool” your approach with the above suggestions to achieve greater benefit.


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