How
well do you know your client?
by Curtis M. Pearsall, Vice President, Agents' Errors and Omissions Department
In thinking about how you would answer that question, let me clarify that "knowing your client" means knowing their needs, and knowing the exposures they will face today and in the future. In the world of E&O, whether you know your clients could make a big difference in your claims experience.
Many of you believe that you know your clients and their needs because you periodically communicate with them, making sure they understand what coverages they have as well as identifying exposures that are not covered by their current policies. For many of you, your clients live nearby. I would agree that you "know your clients." Now, for those that have clients where you mail the policy out each year, renewed as is, and where you don’t communicate with them, it would be hard to say you've kept up with knowing the needs of your customers.
Let me ask another question: Do you have any clients that live in a different state? While this certainly adds to the challenge of "knowing your client," it is a challenge that can be handled through proper and periodic communication.
In the following actual claim example, it does not appear that the agent realized the challenge that he faced or the consequences.
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A robbery occurred at the warehouse involving the theft of a large amount of computer equipment. The carrier paid the loss but asserted a claim against the agent for reimbursement on the basis that the security was not as stated and that the risk should not have been accepted and won! There is no doubt that this claim could have been avoided. The agent should have followed up with the client on the premise’s security question. Instead he spoke from memory after a brief visit to the warehouse. The agent was traveling long distances to service the client. On the issue of security, a specific communication should have been sent to the client that required a documented response. The agent should have realized that special caution needs to be used when communication involves a customer at a distance with complex coverages. |
The
claim involved the failure of the agent to provide a computer manufacturer
with warehouse coverage. The agency specialized in writing commercial
package policies for computer manufacturers. Although the agency
was located in New York City, the client and warehouse were located
in California. The agent had met with the client in California,
then returned to New York and provided the carrier with a binder
and specification sheet. The underwriter inquired if there was a
safe and guard at the warehouse. The agent, either thinking he knew
the answer or not wanting to take the time to find out the right
answer, said yes.It is not realistic for you to know everything about your clients, but to do the proper job in protecting them you need to have either a profile of your client or have the initiative to get the proper information when needed.
As stated in previous E&O articles, failure to provide the proper coverage has been the # 1 cause of E&O claims (these are Utica National's statistics) for the last 14 years. Knowing your customers and doing what’s right by them could alleviate many of these types of claims.
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.