Where
Are Your Accounts Located?
by Curtis M. Pearsall, Vice President, Agents' Errors and Omissions Department
I recently read an article relating the loss ratio of business where the account is greater than 100 miles from the agent's office as compared to business less than 100 miles away. It was interesting to note the significant difference between the two sets of numbers. It is curious that when analyzing E&O claims and looking at the distance between the agent's office and the location of the account, a fair number of E&O claims involve accounts that are not just more than 100 miles away - they are not even in the same state.
There certainly is nothing wrong with an agent writing business wherever they are licensed, but these accounts may need a different level of handling.
When the account is located in your hometown, it is much easier to service and to note changes in the exposure. Maybe one of your staff knows the particular customers or you can visit the account or ask them to stop in. If the account is more than 100 miles away, while the options are definitely more limited, the need to identify a change in exposures is equally as important.
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Here is a claim that speaks to what did happen to one agent:
The claim was resolved through a negotiated settlement, but would have been defensible if the agent had been able to maintain close contact with the client and had documented conversations with the carrier's underwriter. |
A
suit was brought by a carrier against a New York agent for the unauthorized
binding of warehouse coverage at the client's California location.
The underlying claim involved an armed robbery of computer chips
from the client's warehouse with the loss paid by the carrier in
excess of $1,000,000. The basis for the claim against the agency
was over undocumented discussions with the carrier's underwriter,
and allegations against the agency that the warehouse did not meet
the carrier's underwriting guidelines. The agency position was made
more difficult in that he was traveling from New York to California
in an effort to service the client's account, but was not aware
of the type of security or alarm protection at the property. Unfortunately, many claims of this type follow the same pattern. While all accounts need to be serviced, distance does cause some problems. It is very difficult for you, as the agent, to know the account as well as you should. And, don't forget, the company underwriter is going to rely on your office for proper underwriting information.
As a result of September 11 everyone is looking at things a little differently, and agents need to as well. They need to have discussions with customers on the worst things that can happen. September 11 changed our perspective. Many customers are traditionally good at insuring their property and liability to proper values. If accounts bought business interruption, it is doubtful that they bought it factoring in something of the magnitude of a catastrophe like September 11.
Certainly "renew as is" should be anything but the norm. A thorough review of each account, personal and commercial, should be undertaken with some very thought-provoking questions. As mentioned previously, this is time-consuming but can be handled more easily on local accounts. Accounts that are over a certain distance away tend to not get the level of service they need; and as a result, underlying claims can occur in areas where updated coverage discussions did not take place.