Avoid Humpty Dumpty’s Demise

In our current economy, the nursery rhyme Humpty Dumpty comes to mind. “Humpty Dumpty sat on a wall. Humpty Dumpty had a great fall…”

While insurance agents and brokers may not be falling, they tell me they feel as if they are teetering on a wall about to plunge. Like everyone else out there, their bottom lines are suffering. Their customers are demanding more of them. Their revenues and profits are down. They have increased pressures on their time and resources, The margin of error could grow as they try to do more with less.

That's why it is imperative that insurance agents and brokers have E&O insurance. Approximately one out of nine insurance brokers has a professional liability claim each year. Situations vary and usually occur when an insurer denies a claim.

As agencies focus on trying to secure the best deal for their customers—or just maintaining customers—they often overlook critical aspects of their own businesses. By doing so agencies are placed in a vulnerable spot for a large tumble. It is critical that agency owners stop and evaluate their own insurance coverage and internal processes to be sure they are properly protected from a fall.

Coverage has become less affordable over the last few years, and agencies are facing tough decisions on how to fund and pay their insurance premiums. But that is no excuse to forego coverage—because if a claim hits, it could be devastating.

The typical insurance brokers' claim involves a claim from a client that has been denied coverage by the insurer. The client files a complaint against the insurance broker for failure to place coverage, or failure to place adequate coverage, on behalf of the client. Errors can vary dramatically depending upon the type of operation and the particular situation.

E&O insurance typically pays for the cost of defending a claim, whether clear-cut or not. A client may not be happy with the result of a claim filed with an insurer and therefore brings a claim against his agent to obtain additional compensation. For an insurance broker, these types of claims can be just as difficult and expensive to defend as a clear-cut error. Without E&O insurance, the damages fall on the back of the agency.

To try and mitigate damages, agencies should adopt a risk solutions approach. An insurance agency's staff dictates the success or failures. Agencies should focus on effective training programs and problem solving, identifying what the staff needs to be successful. Owners and managers need to set goals for employees and track and measure them. Training should cover learning how to capture and hold the client

Agency management should include:

Documenting communications and recording all dealings with clients and insurers
Establishing standard procedures for handling documents issued by the agency such as certificates of insurance, binders, applications
Using a checklist to insure that all coverage concerns have been addressed, discussed and resolved with clients
Having policies and procedures for handling premiums, cancellations, claim reporting and processing, renewals
Implementing quality control for document review, proposal review, contracts, etc.

Know the products

Agents and brokers need to be familiar with the products they offer clients. Insurance policies vary among insurers and understanding the meanings, provisions, policy conditions and underwriting criteria is essential to effectively meeting the needs of clients and avoiding the potential for E&O claims. The sales process will be less cumbersome and you will build a solid relationship with the client if the process is simple and easy.

Potential claims lurk in this area for insurance agents and brokers. The personal lines agent who attempts to assist a client with professional liability coverage and does not have an in-depth knowledge of the coverages could leave the client bare in some aspect. That action could be setting the path for a complaint.

Protect your client's files

With the new privacy laws in place by the federal government and individual states, insurance agencies are now mandated to provide client protections of personal information.

Dramatic advances have been made in technology, with web-based platforms for insurance products such as on-line quoting. As consumers push for more online services, agencies that can respond to these demands position themselves to enjoy reduced costs and increased growth. However, if not used properly, they expose the agent, broker and the client to higher risks.

Agencies should learn and grow with the changes. Protect client's assets by offering and providing coverages to make them whole once a loss occurs.

Agencies should adopt a data breach or privacy plan which includes the agency's website and electronic systems. Be sure to investigate where breaches could occur and develop a plan of action to safeguard the vulnerable areas. Purchasing a data breach/privacy policy is one of many approaches for protection. Breaches can occur within or outside of an agency, but nevertheless all agencies are at risk.

Insurance agents and brokers should also remain mindful of the special skills they owe their clients:

Disclosure
Honesty and fairness
Skill and expertise
Loyalty
Compliance
Confidentiality
Accounting.

These are all critical and continue to evolve as the industry, laws and court decisions are challenged and amended.

Communication creates loyalty

There are ever-increasing demands from consumers and society. The risk of complaints from customers regarding service and products are prevalent. Agents and brokers need to work harder to give their customers a personal touch. Pick up the phone—call the customer. Build a true relationship.

Insurance professionals should take on a role of “consultant.” They should personally meet with clients and strategize insurance options. Ask yourselves, “How can I help my client succeed?”

Show clients how they can get the most for their money. Today's economic conditions have the clients focused on cost. Coverage enhancements have taken a backseat to cost cutting these days, but agents can counsel their client to capture coverage that meets their needs without breaking their budget.

Network for a broader range

Networking can grow a business, reduce operating costs and potentially gain a competitive advantage. Expanding into new and varied technology environments could revolutionize the way an agency conducts business with increased growth.

Share information about your products and abilities, whether through social media, local associations, groups or community events. Provide an informative website about your agency.

Bring clients together for a social event. This enables them to reach out to one another and share their businesses and knowledge, not to mention that it provides a platform for growth for your agency and your clients' businesses. The stronger your clients are, the stronger you become.

Insurance professionals provide a wide array of services from sales, marketing, underwriting, claims management, risk management and customer relations. Teamwork, knowledge, accuracy, personalized service and quality are critical ingredients to succeed. These qualities also help reduce E&O claims.

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