Loss Control Article

How many times over the past few months have you heard something like this in your office, "Oh, no! I can't believe that Unnamed Insurance Company is non-renewing XYZ Company's policy! They've been with them for umpteen years with no losses." It certainly seems as though insurance companies across the country, both big and small, are changing their underwriting standards and appetites on a weekly basis to address their concerns about issues facing them in today's marketplace. No matter how many times you call your underwriter or the underwriter's boss, you just can't change their minds.

Good companies give you plenty of time to contact your clients and warn them about impending non-renewal notices, but just as many carriers leave the agent hanging and many times the clients get the notices first. Then a frantic phone call comes from a client, sending nasty echoes throughout the office and you, the agent, are left to console the client.

One of the largest sources of E&O claims results from agents moving their clients from one insurance carrier to another on renewal. Agents often place clients with particular carriers because of some specialized coverage enhancements being offered in a class of business. The specialized programs run the gamut from auto dealers to welding contractors. And why wouldn't an agent place their client in one of the specialized programs? The client gets competitive pricing and the broad coverage they need.

The problem presents itself when that Unnamed Insurance Carrier exits the particular program or class of business and the agent is left with the task of trying to duplicate both coverage and price for the client. Then the scramble begins — how does the agent find a carrier that provides the specialized coverage that was attractive to the client? The first reaction is to send a copy of the policy along with a hastily completed application to the agency's ten favorite carriers and hope something comes through. That's probably not the best first move; in the long run it will be more of a time waster.

Instead of sending out an application that may not tell the whole story, it's better to discuss the situation with the client first and then do a revaluation of their insurance needs. The client may be upset because of a non-renewable notice. Spending time with the client will put their mind at ease and assure them that you have the situation under control.

Reassess the client's insurance requirements by setting up a face-to-face meeting. Conduct a thorough review of the client's needs by answering these questions:
- Has the operation changed since the last visit?
- Did the client's business grow into new operations?
- Did the client scale back?
- Does the client still need all the previous coverage extensions?
To be sure all the potential exposures are revealed, it is a good idea to treat the visit as a new business visit; a new submission needs to be completed anyway.
After the visit, it's time to work on the submission. The completeness of the application is paramount. Providing the underwriter with as much detail as possible ensures that the broadest coverage available will be offered.
Once all of the quotes have been received, it's time to do a coverage comparison. First, in one column on a piece of paper or in a spreadsheet, list all the coverages and limits offered from the non-renewed policy. If the new carriers are offering the same or better coverages, then make a notation in another column. Once the coverage comparison is completed for each carrier, it's time to share the information with the client.
During the quote presentation, be sure that both you and the client agree on what exposures exist. Once that is accomplished, the quote(s) can be presented and explained. The most important issue is the differences in coverages and limits between the old carrier and your renewal proposal(s). Be sure the client understands the differences.
Once a decision has been made on which quote to go with, have the client sign a prepared acknowledgment understanding as to what is being purchased. If any changes were made to the quote during the presentation (for example, limits were changed) both you and the client should initial the area where the change was made to show that both of you acknowledge that change.

When the policy is received from the carrier, review it against the quoted policy along with any agreed upon changes. Deliver the policy to the client accompanied with a cover letter and a "Coverage Acknowledgment Form," which states that the client has reviewed the policy and understands what is being purchased. Give the client a few days to review everything and then follow up for the signed form. This form is probably the most important document for your E&O since it is an admission by the client that he understands what he is buying - and more importantly, he understands what you sold him.

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.