Marketing Your Agency

by Curtis M. Pearsall, Vice President, Agents' Errors and Omissions Department

There is an old saying that if the price sounds too good to be true – it probably is.

We are in the midst of a soft market where pricing has come down significantly. There are tremendous pressures that agents face in retaining their business. Marketing your accounts to your various companies at renewal time is certainly one way to "get the best price." However, is this the best long term approach? Selling based on price has its downsides. If you sell the account based on price, you will probably lose it someday based on price.

Also, selling based on price makes a false assumption that all companies are the same. In reality, each company seems to have its own niche – its own marketing thrust. For some, it’s loss control; for some, it’s underwriting expertise in a certain specialty market. For others, it is claim service. I remember a number of years ago when I was involved in an accident with a driver insured through another company. Since this claim was clearly not my fault, I was working with the other company to get my car fixed. I was so impressed with the way the other company handled the claim (prompt handling, courteous service) that I wrote to compliment them.

A good example of this is in the arena of E&O. Since claims handling is so important (isn’t it what you are really paying for?), it is important to factor in the claims handling expertise of the company. How many years have they been writing this coverage? What counsel do they use? Do they provide any loss control tips on preventing claims? A very important consideration is what will happen if there is a claim in the first year of coverage. Will non-renewal be the next correspondence?

Here is an example of an E&O claim that was affected by the expertise of the carrier. This involved a claim that was brought against the agency for failure to advise the client of the cancellation of an auto policy.

The agency client sustained the theft of his vehicle, which was later recovered with $10,000 in damage. The carrier denied coverage on the basis of a prior cancellation for non-payment of premium. The client retained an attorney and made a claim against the agency.

The agency had initially placed the client in an entry level program of the carrier. The premium was paid and continued in monthly installments on a direct bill basis. At renewal, the agent was able to upgrade the policy for a lower premium. The carrier issued a revised, renewal premium endorsement. This was later followed by the carrier's issue of a cancellation warning notice. The agency sent the client a courtesy copy of a computer screen showing the policy was canceled along with a note requesting he call the agency. There was no response from the client until report of the vehicle theft. The client contended he had not received the carrier’s warning or cancellation notices. He alleged the agent had told him not to pay the premium but did acknowledge receipt of the agent’s courtesy notice.

This claim was resolved after a review by Utica National (the E&O carrier) who assisted the agency in a response to the carrier that the account was on a direct billed basis with the carrier responsible for all matters pertaining to policy issuance, termination, premium billing and collection. The carrier reviewed the matter and accepted coverage on the basis they could not prove the client was sent a cancellation notice.

Could this claim have been avoided? This claim as the result of the client’s failure to pay premium could not have been avoided. The successful agency defense was the result of their documenting the communications and working with the agency E&O carrier at the claim’s outset to provide an adequate response resulting in the auto insurance company review and acceptance of coverage.

So, when you are looking at marketing your clients to other companies, compare more than just the price. It may make your decision much clearer.