In the preparation of the application for submission to the marketplace, agents will typically include coverages they are looking for the carrier to include in the proposal. As the producer, you are expecting that the markets you are working with will provide the coverages requested.
The carrier proposals begin to arrive. For many producers, unfortunately, the natural approach is to look at the premiums being quoted. It is probably assumed that the carrier proposals provide all of the coverages requested. But do they?
It is definitely incumbent upon the agency to review the proposal to determine if all of the coverages have been quoted. In addition, the proposal should be reviewed to determine if there are any exclusions or limitations that are being included. While this is especially a key issue when dealing with the E&S marketplace, there is also the potential for the standard markets to include some limitations / exclusions such as a Protective Safeguards endorsement or an exclusion for professional services.
If the agency staff are of the belief that the carrier will advise them of those coverages not quoted, think again. While some carriers may do that, it is not the norm and at the end of the day, it is the agents responsibility to do this “application vs. proposal” comparison.
If the coverage is not what was quoted, a follow up contact to the underwriter will probably be the next step. I have one client that recently found that when they received the proposal, there were over 30 items (including various manuscript wording) that were not provided in the proposal.
Another key issue involves the development of the agency proposal. As your agency looks to develop your own proposal for presentation to the prospect, is your proposal being generated based on the coverages you believed to be part of the carrier proposal or is it based on the coverages actually proposed?
Bottom line, it is probably the best practice to presume that the carrier proposal does not exactly match the coverages requested on the application. For this reason, every agency should have a detailed process (maybe including more than one set of eyes) to review the proposal to verify what was / was not provided in the carrier proposal. The producer’s “eyes” should definitely be part of the process. If this type of review is not done, there is certainly significant potential for some problems to occur.