Agents and Brokers E&O Risk Management Tool Kit

Only tell your clients what’s covered—they don’t need to know about exclusions. Studies have actually shown that more customers want to know what is not covered than what is. Here’s a suggestion: provide a specimen policy with the proposal. This will help the insured better understand his or her coverage. This also will help identify exclusions of concern, and you just may be asked to provide additional coverage.

Write business wherever you want—who’s going to check to see if you are licensed? Know where your customers’ exposures are and make sure you have a license in that state. You can’t write business in a state where you are not licensed. If you have a website, including a disclaimer on it noting the states in which you do business is a positive step.

Don’t ask clients what they need—sell them what you want them to have. Remember: this is the No. 1 cause of errors & omissions claims. Don’t fall into the “renew as is” trap. Perform an exposure analysis and offer the proper coverages; they just might buy them! If they don’t, ask them to sign off. This will provide a great defense if a claim should arise down the road.

Give them the lowest limits—after all, they said they wanted the lowest price. This is the No. 2 cause of E&O claims. With property coverages, the typical problem arises in dealing with building, property values and business interruption values. With auto, the most common is uninsured/underinsured motorist coverage not being equal to the policy limits.

Don’t document anything—it’s your word against theirs and who is the judge going to believe?NOT YOU! Documenting takes time, but it is, by far, the one practice that will go the farthest in reducing E&O claims.

Fake it. Unless they have a claim, they won’t know you didn’t know what you were talking about. Your producers may know how to sell, but do they know what they are selling? When your customers ask whether they’re covered, what do you tell them? Know your business by knowing your coverages. It’s important to know what coverage forms/editions your carriers are using to ensure proper coverage. Above all else, be honest!

When your clients call you to give some instructions, don’t pull the file. What could possibly go wrong? Many a claim has been caused by not looking at the file, such as wrong locations being deleted. How can you advise your customers without the file?

Don’t worry about service: sell, sell, sell. Obviously, producers need to be out of the office to sell— so get the CSR involved. After all, the customer is probably going to call the CSR anyway. Plus, visit or contact your customers periodically. There is no better way to keep up with your customers’ needs.

Don’t tell them the carrier was just taken over by the Insurance Department. Price is the key, and there’s always the guaranty fund. Most guaranty funds have limitations on them. First, there is typically a cap. There also is a time limitation regarding when the claim must be made, as well as issues regarding the location of the claimant and the relation to the state of domicile of the company. Agencies should have a standard as to the rating of the carriers with which they do business. If one of your companies drops to a certain level, write to your customers to advise them of this and ask if they would like to have the coverage replaced with a more financially sound carrier.

Don’t be too honest with your carriers: nice guys finish last. Tell your carrier the correct underwriting information, obviously including losses. If you don’t tell them the correct information and they find it out later, they will contend they would not have written the coverage had they known the correct information.