“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.