Moving a book of business to new carriers – a potential HUGE E&O issue!

Virtually every day, agents will move an account to a new carrier. Typically, the basis for the move is due to the desire to get a lower premium for the client. This issue has developed into one of the bigger issues / concerns for E&O carriers. The concern is that when you move an account to a new carrier, there is the possibility that the “new” coverage is deficient in some areas. The best practice is to proactively advise the client (in writing) those areas where the coverage is not as broad as the expiring policy.  

There are other times where the agent is forced to move an entire block of business to a new carrier. Possibly the agency was not meeting the volume requirements of the carrier, prompting the carrier to terminate the relationship or the carrier may have had a major issue with the agency (such as a history of misrepresenting the risk on applications). Also, quite possibly the agency had some issues with the carrier such as their claims practices, their strict underwriting, etc. The possibilities could go on and on.

This now results in the agency needing to move the entire book of business with that carrier to one or multiple carriers. Whether one account or an entire book is moved to a new carrier, the issues are largely the same.

The best approach is to proactively strategize how the agency is going to handle this. The prior carrier may have had excellent rates and thus when moving the account to a new carrier, the client could potentially wind up paying a higher premium. Whether the premium difference is major or minimal, it is probably best to notify the client of the need to replace them with a new carrier and any potential premium issues. If there will be some coverage issues, the client should be advised of these coverage issues in writing (definitely for any reductions in coverage).

When moving an entire carrier book, there is the possibility that multiple carriers will be considered. For each of the carriers under consideration, an analysis of the coverage should occur comparing the coverage to the “expiring”. Some of the coverage differences might be “subtle” due to a difference in the edition dates of the forms. This is especially true for homeowners’ accounts. The analysis needs to be performed. In addition, extreme caution should be exercised on how the message gets delivered. A statement such as “we need to move you to a new carrier and the coverage will be even better than what you had” could come back to haunt you.

Moving an entire block of business to new carriers will certainly be a lot of work involving the completion of new applications, etc. Determining the key steps should make the process go smoother with one of the key steps involving what premium and coverage differences the client will face. Without this degree of strategizing and premium / coverage analysis, there could be a significant number of E&O headaches waiting to occur.    

 

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