In one of my recent seminars (the topic was current E&O Hotspots), a young lady very astutely commented that from her perspective, the economy was having a significant effect on how the agency customers were managing their insurance programs. Ironically, this issue was Hotspot # 12 in the seminar.
During the ensuing discussion, these were some of the topics / issues that the agency was experiencing:
Vacancy – with foreclosures both on a personal lines and commercial basis at a high level, more properties are now vacant. Do your customers know how their policy addresses vacancy?
Insureds trimming back coverages / limits – unfortunately, insurance is oftentimes one of the areas that the public looks to when reducing expenses. It is important to get these requests in writing. In addition, there may be times where further discussion with the customer is appropriate to educate them on the potential impact of the reductions that they are requesting.
Insured buying lower limits – if the customer wants to buy a lower limit, get this decision documented. The key is that they know that higher limits are available, but they are deciding not to buy those higher limits.
Audits – customers low balling on sales / payroll figures. Because of the uncertainty and the difficulty that various businesses are having in projecting their next years sales / payroll, etc., many businesses are being very conservative in their estimates. This has the potential for a significant additional premium at audit time. Make sure the staff knows how the agency agreements address these audits and when they need to be turned back to the carrier to avoid the agency being responsible for the additional premium.
Moving accounts to save your customer premium dollars – certainly due to the economy, customers have put tremendous pressure on agencies to find them coverage at a reduced premium. As a result, agencies have re-marketed these accounts within their office. The key issue from an E&O perspective is that if you look to move that account to another carrier, it is extremely important to identify any areas where the actual coverage is less. Customers want to save money on their insurance but will they still be willing to switch to another carrier if they know that they are giving up some coverage. Talk with them about this and if they agree to move the account, be certain to get their sign off acknowledging the coverage differences.
Customers paying their insurance premiums at the last minute – if they stop in your office to pay their premium, be certain to check the status of the account before accepting the premium. If you were to accept it only to find out that the policy was cancelled for non-payment, you could have a problem if the customer has a loss and the carrier denies the claim.
Since it is difficult to know exactly what the next scenario your staff is going to encounter, take time at the next staff meeting to talk thru these issues to educate them. It would also be appropriate to ask them what they are seeing in this area.