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WELCOME TO IAOA 18

I love the word collaboration! As a noun the definition is: the action of working with someone to produce or create something. As a verb the definition is: working together jointly to create something of value and knowledge between each other.

Each day U.S. E & O Brokers receives calls from agents across America. U.S. E & O Brokers assists agents everyday on claims, subpoena’s and issues like buying and selling a book of business or adding independent contractors. Today I am sharing claim issues that need to be addressed in your office with producers and clerical staff to start off 2018.

The First Way to Avoid E & O Claims is Risk Prevention. Claims don’t always involve big payouts, but the top five below are consistent errors or omissions that happen year to year.

If Risk Prevention does not work, then E & O Protection is what will protect you and your agency from financial harm. I listed the top description of claims by type followed by ways agencies may have been able to avoid claims.

Learning from the Past – Top Claims by Type in 2017

1. FAILURE TO PLACE COVERAGE
Personal Lines - #1 Claim – Failing to bind coverage for flood insurance
Commercial Lines - #1 Claim – Unable to find replacement policy and failure to notify named insured in a timely manner

2. FAILURE TO FOLLOW UP ON CARRIER ENDORSED CHANGES
Personal Lines - #1 Claim- Agency placing endorsement change on the online carrier system and not verifying the endorsement was processed/issued by the carrier
Commercial Lines: #1 Claim – Property Schedules updated but not processed on renewal

3. SCHEDULED JEWELRY, ART, and COLLECTIBLES
Not scheduled or offered when renewing coverage with a different carrier.

4. CERTIFICATES OF INSURANCE
Issued certificates prior to carrier accepting coverage and/or coverage changes
Issued certificates with incorrect coverage

5. POLICIES ISSUED NOT AS EXPIRING
Policy form changed at renewal. Agent had to opt for additional premium of $3.00 to add an endorsement that was included on the policy the year before. Same carrier issued both policies

AVOID CLAIMS BY NOT:

1. Failing to Place Coverage
If accepting money or binding coverage on behalf of your insured, keep a record of money received and verify coverage was placed and payment applied. This is such a common claim that whether you have a management system or not, a simple spreadsheet can keep track of coverage placed by day. Claims are created by no payment recorded and no one followed up to make sure payment was applied or coverage was issued. In the case of the agent failing to forward payment to a flood provider, flood occurred which resulted in a $225,000 loss. The payment was received 3 months prior to the hurricane. The insured called after the hurricane to verify coverage and the check was found in the agency in a drawer.

How do you place coverage without an updated /current application? Avoid situations like a workers compensation issue of failing to place coverage. Situation could have avoided by not using last year’s application to quote. Things change and had a new application been received the agent would have found terms. If you cannot get terms for a renewing client or a new client, tell them in writing within a time period that would allow the customer to find another agent. If a customer is not cooperative on getting new or renewal information, then have a procedure in place to get off the risk in a timely manner. This type of loss is more common than you think – so think twice about waiting to the last minute to notify a customer you have no replacement coverage. Failing to replace coverage on a Friday resulted in the client not having workers compensation and over the weekend a death occurred.

2. FAILING TO FOLLOW UP ON CARRIER ENDORSED CHANGES
The online carrier systems vary and many agents are using multiple systems. The typical claim is the customer change information is placed in the system, but the button to bind the coverage is not released. Agents tell me they have even printed the computer screen as proof they were on the system. This error usually happens at the end of the day and happens when someone is in a hurry. Again, no one wrote down to follow up to make sure the change occurred online. Not all carrier systems are alike. Not all carrier systems are sophisticated or real time. Follow up or a suspense item may help avoid these situations.

3. SCHEDULING JEWELRY, ART, and COLLECTIBLES
Customers assume you know everything when renewing or replacing coverage. You do not know everything. Have a checklist. Valuables are not covered adequately under a homeowners policy in some cases they must be scheduled on a separate policy to have coverage for an appraised value (this includes paintings, baseball cards, coin collections, coats, jewelry, antique toys, etc.).

Customer can acknowledge they are self-insuring these valuables if not insured. “Risk Management Note to Agency” - your customer did not come into your office to self-insure. Failure to transfer valuables on existing homeowners policy with Chubb when a couple divorced and new home was purchased by the wife. Agent failed to transfer the scheduled items. Insured called after losing one earring worth 20,000. Good News, the insured found her earring.

Second loss type, insured had a valuable baseball collection and the agent not only visited the home from time to time, but insured was the little league baseball coach for agent’s son. Numerous times they looked up the value of certain cards. Baseball collection was lost when home caught on fire. Insured thought contents were covered.

4. ISSUING CERTIFICATES WITHOUT VERIFICATION FROM CARRIER
Do not issue certificates without carrier confirmation of coverage.
Do not check coverage boxes that may exist. If you do not know if certain coverages exist per a contract, then you cannot issue.
All policies can be different from year to year, so certificates must be checked for accuracy.
Online resources can be available to help understand terms, and in some cases you may need to find an outside source to evaluate contracts.
Failure to issue correct certificate of insurance for coverage per a bank loan for insured.
Agent had the correct box checked on the Accord form to meet the loan contract, however the policy was not endorsed correctly, thus the Certificate was incorrect. Creditor was to be listed by contract as a Lender’s Loss Payable versus a Loss Payee. The Lender’s Loss Payable endorsement must be attached to a commercial policy and allows the bank/creditor to be paid in the event of a loss (like a mortgagee clause). In this case, the insurance company did not want to pay the insured due to fraud reasons so by not having the correct coverage; the bank did not get paid for the loan on the building.

* Great Risk Management piece on topic can be found at: https://www.admlawfirm.com/news-reader/loss-payee-vs-lenders-loss-payable-endorsement-theres-a-difference.html

5. ISSUING POLICIES THAT ARE NOT AS EXPIRING
Unfortunately, many policies that are renewed with the same carrier can have changes from year to year. Neither the insurance carrier nor your MGA has an obligation to let you know the coverage has changed.

Agents may jump from market to market when coverage is hard to find for a client. Checking policies is time consuming. Set aside a time to verify coverages and keep a checklist for your client. When changing markets, you can call attention to the fact that the policy form and endorsements are not as expiring, a consumer will rely on your expertise to know if coverage was replaced. If coverage is reduced, then a coverage reduction notification form should be signed stating limits or deductibles or coverages could not be replaced as expiring. Claims result due to agents failing to document changes and note files. Remember, claims on direct bill policies can happen years after the change. Do you think your insured remembers reducing coverage five years ago?




Do you know that claims still occur against agents from insurance companies every day because:

  1. APPLICATIONS ARE NOT SIGNED
  2. APPLICATIONS ARE NOT UPLOADED TO THE CARRIER SYSTEM
  3. APPLICATION HARD COPIES ARE NOT SAVED AT THE AGENCY LEVEL

If you have a customer on direct bill and you have not saved the original application in some method, the carrier may subrogate against you if they ask for the application due to a claim. Crazy right?

Well, you may have uploaded the application five years ago, but the carrier may have lost data, or has a retention policy less than five years. No matter what the agency document retention policy is in your office procedures, you need to make sure you are adhering to the carrier contract.

Another example of E & O forms not saved by agents is Uninsured Motorist Waivers.

Some carriers do not allow electronic signatures. Be aware when signing a new carrier appointment that you understand the rules of electronic signatures versus wet signatures.

Working with a new market that does not require an applicant to sign an application?

Read the carrier contract carefully because you want to make sure you are understand your duties as an agent and your duties to the insurance company. Procedures may need to be put in place to verify the customer understands coverage. What are you going to do to protect yourself? This is a must discuss!

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