 Selling
Personal Lines –
Good From an E&O Standpoint?
by Curtis
M. Pearsall, Vice President, Agents' Errors and Omissions
Department
I am not sure if this is my imagination
or not but it certainly appears that there is a resurgence
from both companies and agencies to sell personal lines. There
is no doubt that with the proper technology and the right carriers,
selling personal lines can be very rewarding.
Is it rewarding
from the E&O perspective? For virtually
all of the 40 years that Utica has been protecting agents
in the US (2006 is our 40th year), we have been
capturing various details behind the claims data.  During
the last 5 or so, we have found that the claims frequency
of agents that specialize in selling personal lines is
actually higher than agents that sell commercial lines.
In some years, the frequency has actually been almost twice
as high.
Looking at the data shows that when you combine
personal auto, homeowners, dwellings, personal inland marine,
personal wet marine, personal umbrella and flood, over 40 percent
of all E&O claims come from the sales and service of personal
lines. From the E&O claims
perspective, the main issue that seems to differentiate personal
lines from commercial lines is the size of the claim. While
there are more claims involving personal lines, the claims
tend to be smaller. Whereas in commercial lines,
when there is an E&O claim, the average severity is over
double that of personal lines.
When
focusing solely on the personal auto coverage, there
are two main drivers of claims. One
involves uninsured motorist coverage and the other
is physical damage. On the UM side, suggest that
you have a standard operating procedure that requires
your staff to at least offer UM coverage equal to
the limit of liability. In the event that the insured
does not want the higher UM coverage, many states/companies
require some type of sign-off form. Obviously do
not sign for them and make sure that you know the
expectations regarding which Named Insureds should
sign the form. Some states require all Named Insureds;
make sure you know the requirement. Even if the state
does not require a sign off form, a good agency practice
is to get the insureds signature acknowledging that
they do not desire this coverage. This documentation
will be key if a claim is mad against your agency.
In regards to physical damage, documentation
is a big key. Whether the insured states that they
do not want physical damage coverage or only want comp
and no collision, get this in writing. Although the
chances that these claims will not necessarily be big
claims (probably less than $10,000), chances
are that based on the size of your deductible, you
will wind up paying most of this out of your pocket.
Do the right thing and document the discussion.
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| When
dealing with homeowners, while there are some claims
involving liability, the majority of the claims deal
with property. Oftentimes, it is an
issue dealing with valuation. It is important to make
sure that with the price of plywood and other building
materials, a concerted effort be made to keep your
customers insured to value. Since many policies have
built in provisions that address this, make sure that
you know how your companies handle this. In addition,
while the premiums associated with homeowners may not
be that high, I strongly suggest that you see the premises
that you are insuring. It would be advisable for you
or a member of your staff to visit the premises and
take a picture while also observing any unique characteristics.
Whether that involves a wood stove, a trampoline, a
dog, a pool, etc. is valuable information. If you know
that the home was in close proximity to a river or
stream that could overflow, this would give you a great
opportunity to discuss flood insurance. Although there
is no doubt that with the recent catastrophes, most
homeowners know that flood is not included, isn’t
your goal to properly protect your customers? |
Many folks feel that
selling personal lines is easier than commercial lines. After
all there are less products and more standardization of forms.
However, there are areas where if not properly handled, E&O
claims could occur. Taking a little extra time to do the
right thing could save you considerable dollars later.
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