Costly errors and omissions claims in insurance have increased substantially over the past few years. This is why insurance agents need to take concrete steps to protect themselves.
The biggest risk of being an insurance agent is the inaccuracy of errors and omissions claims. These claims can often accrue from a simple mistake. That’s why it’s imperative for you to provide the right insurance coverage for your clients. Going a step further will save you a world of hurt. It’s important that you have the right E&O insurance policy for your agency as well.
This blog lists out the steps you can take to protect your business from insurance agent errors and omissions claims.
The Inability to Maintain Appropriate Coverage for your Client
The crux of the client-agent relationship lies in the trust that you will monitor insurance coverage while providing clients with the appropriate guidance on how to protect their financial health. However, there will be circumstances when you might not get the insurance coverage you deserve. In such cases, the client could take legal action if they feel you are at fault. A substantial percentage of E&O claims against insurance agents are cases like this.
How You Can Avoid This Situation
You can make sure that you avoid such E&O claim situations by taking the following steps:
- Fully evaluating and ascertaining each client’s insurance needs and ensuring your recommendations are precise.
- Making sure that the client is immediately notified if the requested coverage can’t be purchased.
- Saving your communications and documents after every interaction. To avoid ambiguity and confusion, send a follow-up email to review what was agreed upon or what was declined. Maintain these records even after the client relationship has ended.
- Placing coverage with an insurer that is solvent is your duty as an agent or broker. You must monitor carrier solvency using a robust Insurance Rating Service.
Inability to Precisely Explain Insurance Coverage
You can protect yourself from E&O claims if you’ve followed the practices outlined to ensure proper coverage. However, you need to ensure that your clients are aware of everything that could possibly affect their coverage.
Additional Steps to Protect your Agency
Before your clients purchase a policy, ensure they fully understand all the terms and coverage limits. The best way to do this is by reviewing the complete details of a policy. Talk about the premium due or changes in policy terms when a policy is up for renewal. Ensure that you accurately represent the insurance policies you offer by constantly reviewing and updating your marketing material.
Communication Errors
Errors creep into new policies, maintenance, and renewals when you are working with different software programs. Reduce the number of people working with a client throughout the customer journey to minimize the risk of claims. When information gets passed over the telephone from one person to the next, the end message could end up getting distorted. This is something that can also happen with client management.
One strategy to prevent this is to assign specific agents to clients. A single person can be held responsible, right from the initial consultation to purchase and maintenance. Keeping agency staff updated on the policies they sell becomes very important.
Inability to Identify Exposures
Poor risk analysis is often the biggest cause of most E&O lawsuits being filed against agents. This indicates that they need a better understanding. You can protect your agents and agency by:
- Testing and evaluating the level of risk analysis skills among new hires
- Mandating employees to take risk analysis courses
- Finding resources to help evaluate clients' risks
Inability to Communicate Policy Changes
It is up to the insurance agent to inform the client if there has been a change in policy coverage. From notice of renewal to a change in the insurer’s financial condition, this can encompass a number of changes that could affect the ability to maintain the policy or cover a claim.
Sending Inaccurate Client Information to the Insurer
There are three crucial funnels for information that travel from the agent to the client, client to the agent and agent to the insurer.
You need to set up a process where agents can monitor claim activity and perform regular follow-ups when claims are filed. This will ensure that clients and insurers are always in sync. You should also be able to monitor the loss ratios of your insurance carriers, and use common patterns to anticipate problems. It becomes crucial to communicate every claim to your insurer, to ensure that it is handled swiftly and appropriately.
Mitigate E&O Claims with Exdion
Keeping these recommendations on the top of your mind and working on them is the best way forward.
Automated tools for policy checking can save significant costs. Automation costs much less than the cost of a full-time employee. It also eliminates human errors which normally range between 5 and 7%.
Exdion Policy Check allows insurers to customize their automated policy renewal process using Artificial Intelligence (AI) and Machine Learning (ML). Strengthen your customer relationships and provide excellent service while mitigating the E&O risks of insurance claims. To know how we can help, get in touch with us.