I am not sure if I am the official author of this quotation but it is definitely an expression I have used thousands of times. Why? Because when you think about it, you can see how accurate it really is.
If one of your clients had a loss, what are the chances that there is an “error or omission” on that file? Possible but not probable. But if 250 of your clients have a loss, what are the percentages that at least one of those files contains an error of some type. Much more likely.
In an article in the January issue of Claims Magazine (PropertyCasualty360.com), it was cited that through 9 months catastrophe losses were projected to be in the $28 billion area, over triple the 2016 result. This was heavily driven by Hurricanes Harvey, Irma and Maria. The article also stated that some industry experts are estimating that 2017 could finish up with catastrophe losses in the $70-$100 billion area, making it the largest on record.
When one thinks of catastrophes, Hurricanes are probably one of the first issues that comes to mind. However, other catastrophes include earthquakes, fire storms, significant snow falls, wind storms, etc.
You can certainly count on a significant number of E&O claims coming out of these catastrophes. The issue could involve the lack of coverage, insufficient limits, misunderstandings in coverage with poor documentation of those discussions, etc.
Since it is difficult to predict, with any degree of accuracy, which of your accounts are going to suffer a loss due to a catastrophe, agencies need to have procedures in place that serve as communication to clients the various coverages they should consider. This can take the form of a renewal questionnaire which are sent every year to clients to bring to their attention exposures they may not have coverage for. Also, in the agency proposal, reference to suggested coverages should be included. Addressing exposures such as flood (including the importance of buying flood coverage for the full value of their house), earthquake, tornados etc.
While no agent wants to have a client that has suffered an uninsured loss, it does happen. The purpose of these questionnaires is to have documentation showing that you reached out to the client to educate them on a variety of issues. Even if the client does not return the questionnaire, there is still a value in sending it as it will be part of the agent’s defense in an E&O matter should one develop.