Add Auditing to your E&O culture

As President Ronald Reagan was quoted many years, it was very important to trust but it was equally if not more important to “trust but verify”. This is where auditing comes in.

Auditing is actually one of the top 5 initiatives agencies should implement to strengthen their E&O culture and commitment. After all, for agencies that have documented workflows and procedures, how else can management have a comfort level that the staff are meeting the expectations? Unfortunately, if you were to mention that your agency was going to start “auditing”, you might hear a groan or two.

So maybe the key question is that if an agency were to start auditing, how can they ensure that their staff embraces it for the value it provides?

First off, regardless of who is going to actually be doing the auditing, it is important that management explain the reason, the value and projected benefit. Some staff may feel that auditing is a “gotcha” and that the staff member is going to get dinged for not doing the job. Yes, that could happen but it is important that it not happen during the first year or so of the implementation of the auditing process.

There is certainly the possibility that there is a misunderstanding of some of the procedures. In addition, there may be a need for further training. These are all valid outcomes from auditing and should be handled as such. If a staff member does not do a procedure properly, it is important that the “auditor” or management take the time to meet with that staff member and explain why they did not “pass” the audit on that specific question. Possibly the issue is that the employee posted an item (example a checklist) to the agency system; just not to the right tab in the agency system. Meeting with the employee and explaining the proper procedure and expectations is important. Obviously, while the employee may get a “get out of jail card” on this year’s audit, they need to know the proper spot in the system in the future to ensure they get the credit.   

By approaching it in this way, it shows the staff the importance of auditing but that it will be implemented fairly and openly. Auditing really is that important but the way it gets introduced could determine if it achieves the desired results.



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An opportunity to enhance your renewal process

If one were to survey insurance agencies, it is a fair bet that the process for evaluating a client’s exposure is pretty good on new business. While the initial step of securing a copy of the client’s current policies seems to be the norm, agencies typically will then take the time to evaluate the current coverage to try to find uninsured exposures. After all, this is an effective way to increase the chance of the “new agent” writing the account.

Unfortunately, for many agencies, this is where the process often ends. Renewals get “renewed as is” and there is not a real concerted effort to identify uninsured exposures or to even mention coverages that were discussed during the new business process that the client did not purchase. In fact, it is probably fair to say that on renewals, the agency does not even communicate with the client except to mail the policies. Is this how things are done in your agency?

Whether the account is a personal lines customer or a small commercial lines customer, there is a process that agents can follow to encourage their customers to notify them of some insurance issues. Large commercial accounts normally get some specialized handling but this process could certainly be considered for larger accounts as well.

Agencies should mail (or e-mail) a renewal exposure questionnaire to the customer on an annual basis; this mailing is typically done 60 days prior to renewal. A cover letter should be attached that will explain the process and objective. The questionnaire should address exposures the customer should be aware of that are not insured. When referencing coverages for the customer to consider, use language such as “Other coverages to consider include but are limited to the following”. This lets customers know of some coverages but it is not possible to list them all.  

FYI, it is not necessary for the agency to follow up on the mailing. If the customer does not respond, language similar to the following is suggested: “Please note if you do not complete and return this questionnaire, your coverage will continue based on the information you previously provided.” Obviously for questionnaires that are returned, they should be promptly acted on.

 The questionnaire should include some “disclaimer type language” such as:

- “Higher liability limits may be available”   

-  “Please review your coverage and limits and contact the agency with any questions or changes”.

Many agencies also include a reference to some common exclusions such as flood, earthquake, employment practices, etc.  

With most agency management systems, the mail merge capabilities should allow this process to be implemented quickly and efficiently.

This is a very proactive loss prevention measure and hey, you may just find your agency writing more business!

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Dedicate time to discuss E&O (and only E&O)

When was the last time the office staff got together specifically to discuss the variety of issues pertaining to E&O loss prevention? In most agencies, the answer is probably “we never have”.

Recently, I was at an agency’s office and it was very evident that at least once a year (sometimes twice), the various staff get together and review the key E&O objectives. Issues such as documentation (what it should look like), exposure analysis / annual checklists, the importance of policy checking, etc. were discussed. Obviously this agency has a very strong E&O culture and their goal is to make sure that everyone understands the role they have in determining this culture. After all, agencies don’t make mistakes, people do.

Now that we are in the second half of the year, agencies should look to review the various procedures / issues, etc. If possible, close the office for the day, spend a half day reviewing the E&O issues and then do a fun thing in the afternoon. There is probably no perfect time to do this (like having a kid or buying a house) but sometimes, it just needs to happen. This can be done at a staff meeting but to ensure that the staff is focused on the issues at hand, a separate commitment might be more beneficial.

If you are looking for E&O topics, consider the use of many of the articles from this blog. Good luck.

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Have you asked your staff?

In virtually every one of my agency visits, when I meet with the staff, I ask those staff a very basic question: What do you think is a realistic issue that in your area has the potential to generate an E&O claim? I have been asking that question for many years and very honestly, every time I ask I get a very thoughtful answer. Whether the staff member is a “newbie” or a 30 year veteran does not make difference. 

What this says to me is that the agency staff, without a doubt, know the issues that could occur or are occurring in their area that concern them and may in some cases “keep them up at night”. 

When was the last time you asked your staff this type of a question? First, it is important that you encourage and potentially reward them for their openness and honesty. Based on their response, the follow up questions should focus on what needs to be done to address those concerns. Possibly, the solution might involve additional training or a better understanding of the expectations. In some cases, the solution might include some additional initiatives such as education of the customers on how their insurance works. Obviously, it is important to discuss the issues that arise and determine what additional steps are necessary. I don’t give the folks a heads-up on the question but it might be appropriate to give the staff some advance notice to encourage very thoughtful answers. Maybe even consider a recognition of some type for the issue of highest concern. 

Most managers probably believe that they know all of the issues and concerns within their agency that have E&O claims potential and in most cases, they probably have a pretty good idea. But to compliment that knowledge of the issue, involve the staff and ask for their thoughts. I bet they have some interesting perspectives that might just be a surprise and be very valuable moving forward.  

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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 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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