How many insurance policies (personal and commercial) does your agency write? Let’s use for our example an agency that has 10,000 policies. Using 260 work days calculates to just short of 40 policies a day being sent out to customers.
Some of the latest numbers from a variety of sources (including companies that do policy check for agencies) indicates that approximately 9% of the policies from carriers and wholesalers contain at least one error. Thus, if policies were not being checked, agencies would be sending out, on average, 4 policies a day that contain at least one error and there is certainly the possibility that some of these policies contain more than just one error!
Bottom line, mistakes are being made and it is up to you, as the retail agent, to identify these errors and get them fixed.
Many agencies are of the belief that if a problem develops involving an error in the issuance of the policy, the carrier will simply “fix it”. Is there a flaw to this logic? Yes, there is!
If the error is identified in the first year, there is greater likelihood the carrier will reform the policy – essentially, they will “fix it”. There are no guarantees, but this is probably the way the matter will get resolved. However, if the error is discovered after the first year (on subsequent renewals), it is very unlikely that the carrier will “fix” the policy. Basically, the terms under which the policy was issued will stand.
The other key issue involves the future review of policies. If the policy was issued with an error that was not identified, then future reviews of the policy will probably not catch the error. Essentially, the error is being repeated but it is not getting caught. Obviously, a significant part of policy review presumes the policy the renewal is being compared to is correct. Is it?
The issue of policy checking applies to both personal and commercial policies. The fact that a large percentage of personal lines policies are downloaded does not mean that the policies are correct. In commercial lines, there is tremendous potential for the policy to contain at least one error. Unfortunately, oftentimes, it is at the time of a claim when the agency realizes an error in the insurance policy. At this point, it is too late.
The feedback that I am hearing is that not only is the percentage of policies with errors close to 10% but that some of the errors are EXTREMELY significant. Don’t take policy checking lightly. It should involve more than just a cursory review. A good best practice is to develop a policy checking document that is completed on every policy. The completed document should indicate who completed the review, when it was completed and what was found. This document should be stored in the agency system.