Let
Good Business Practices be Your Guide
by Curtis M. Pearsall, Vice President, Agents' Errors and Omissions Department
Having started in this great industry in 1975 working as a CSR for an independent agency, I have a fairly good sense of the changes that agencies have gone through over the years. Without question, today’s agency looks quite different from the agencies in the mid 70’s.
Today, agents offer a wider range of products to a wider range of clients. Items such as PEOs (Professional Employer Organizations), Loan Origination, and the sale of Extended Warranties are products that agents have traditionally not marketed. In today’s marketplace, the need to diversify is stronger than ever. Also, the Internet as a vehicle for marketing is complementing the traditional approach.
When considering involvement in one or more of these areas, it is important to approach them in the right context.
A good business
practices approach is to ask yourself the five W’s – who, what, where,
why, and when. You should certainly know "what"
the concept is all about. This will help determine if it fits into your
business strategy. Next, "Why" do I want to market the PEO concept;
"why" do I want to use the Internet for
marketing? If you can't answer that question, you may not 
need to go
any further. Now that you have answered the "why," proceed
with identifying "who" is going to handle the product (both the
sales and the support) and what training they will need. "Where"
is probably the easiest to give thought to but the "when" is
very important. Lay out a timetable that allows you to set up the structure
(personnel, training, space, marketing, etc.) that will allow you
to achieve the desired results. Proceeding too quickly will cause things
to fall between the cracks, proceeding too slowly could cause you to miss
some business opportunities.
As with your traditional insurance operation, a number of "good business practices" are equally important. Education is very important. Also, communication to your staff and your clients is important. In addition, the use of some type of exposure analysis checklist will be solid evidence of your professionalism and will, among other things, probably result in a serious decline in the number of E&O claims brought.
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The following example shows that good documentation continues to be a very powerful defense against an E&O claim. This claim involves a suit that was brought against the agent for failure to provide a trucking firm with adequate liability limits on their commercial auto policy. There was an underlying auto accident where a tractor-trailer operated by the agency client rear-ended an auto that was driven by a pregnant woman who went into a coma due to the crash. The trucking company’s insurance carrier paid its $300,000 liability limit and the trucking firm agreed to a $3.6 million arbitration award, assigning its inadequate limits claim against the agent to the injured plaintiff. The defense of the agency was based on the fact that there was an originating broker and that the coverages had been provided as requested - with the trucking firm not raising an issue over limits for 8 years prior to the accident. The case went to trial and the court ruled in favor of the agent on the basis that there was no duty owed in regard to higher limits. The agent, in this case, represented the carrier, not the client. The originating broker, a co-defendant, did resolve its exposure by a negotiated settlement. In this claim, in the agent's position as a wholesaler, defense counsel was able to show that the agent had exercised good business practice with a well documented file that demonstrated the liability coverages were provided as requested in accordance with the duty owed. |
Let good business practices be your guide no matter what you sell or market.