E&O Risk

by Curtis M. Pearsall, CPCU, CPIA
Special Consultant to the Utica National E&O Program

As you look back in time, there appears to be a direct correlation between the status of the market and the likelihood of an E&O claim facing your agency. During a soft market premiums are down, coverage is not only more readily available but it is probably broader and as a result, insureds are happier. A hard market comes along and pricing is up, companies are non-renewing more business (and there are fewer markets for you to go to place this business), coverage is more restrictive and insureds are not happy.

Which marketplace do you think results in more E&O claims? There is no doubt that E&O claim frequency will traditionally rise in the hard market. One common error that occurs more frequently during the hard market is when an agency customer gets non-renewed and the agency needs to find them a new home. You find a new home but the coverage is not as broad. Do you review the policies and explain to the customer the differences between the two policies?

If I may, I would like to ask you and your staff to rate your agency based on the following statements (thank you to Kitty Ambers, Executive Director of the CPIA, for allowing me to steal some of her ideas):

Our staff receives regular training in people skills.
We devote office meeting time to think about and discuss our customers' needs.
We regularly seek and review client input and modify and improve our internal systems based on that input.
We have an internal program to educate our staff and our clients of changes in the insurance product.
There is an ongoing effort to improve the quality and accuracy of communications with clients.
We communicate each year with our customers to identify any change in their exposures.
We document any product offerings that our customers don't want.
When switching coverage from one company to another, we identify and communicate any differences in the coverage offered.
In addition to advising our customers what is covered, we advise them what is not covered.
We work hard on preventing, not correcting mistakes.

Most agencies know what they are good at. Hopefully this confirmed what you knew but I also hope that it identified some areas that are in need of improvement. If you asked your staff to complete this as well, it may be hard for you to hear some weaknesses that your staff thinks your agency has. However, this gives you some opportunities to set some goals to achieve. Owners must be prepared to accept the bad news along with the good.

Each of the above statements has an E&O element to it. If you didn't fair so well in one area or another, think about what you can do to change things. Dedicating an agency staff meeting to discussing particular areas to brainstorm ideas for change is a good starting point. Since you are nothing without your customers, treat them with professionalism. Ask them to rate you. Send them a survey and reward their response with some type of gift. It is very important during this marketplace to increase your communications. This applies to both your clients and your companies.

There is no doubt that this marketplace is challenging for everyone. The workloads are heavy and it probably seems like every account needs to get shopped. But I am firmly convinced that the agencies that have a strong focus on professionalism, and treat their customers as they deserve to be treated, will come out of this marketplace a big winner.

Communiqué is published for our agent-customers for informational purposes only and is not intended to be, nor should it be relied upon as legal advice. Legal questions should be directed to your legal advisor.