Calling non-pay clients... a good idea or an E&O exposure?

[etimer]

Yes being sued can't be stopped. Keeping the person suing from winning the suit is the key. I don't believe what the previous agent did has anything to do with your E&O exposure unless, you tell them you will do what the other did for them.

After 26 years in the business as an agency owner, my advice: Just keep your E & O paid up, & don't worry about whether you'll be sued for providing a service that most are either to worried about, or to lazy to do. I have never heard of an actual case & think that making the calls is actually going to make your case stronger than if you are accused of not making the calls at all. For example they can say, " my previous agent called & I expected my current agent to do the same." You can always be sued & the chances are it will be for something else, like not placing coverage, or not placing the right cov, ect... Just my opinion.

[kevinraz]

15+ years in the business and I've never heard of anyone having an E&O problem with this issue. I've you've got enough volume to support losing those who get cancel notices you can afford to disregard them.

When I was on the PL side of the biz I only called the ones I knew well. When I was a commercial agent I called on just about every cancel notice I received as it really hurt to lose those accounts. I put a note activity in the system to document I had called, took 5 seconds in Applied.

As an underwriter I also called on every account that received the final notice. My company was required to notify me if an account over $25k in premium was in cancel status for non pay. I'd call the agent to make sure they knew and was surprised how many times the producer was clueless that their account was getting ready to cancel. Saved the vast majority of them.

[etimer]

If they can sue and win for failure to notify of cancellation http://www.uticanational.com/NewEandOsi ... htm#Claim2

They can sue and win by proving it was your standard practice to notify them of late payments. Just think like the attorney and you can come up with the plaintiffs attorney's speech. You honor, this client was with XYZ agency for five years, it was the agency's standard practice to call upon receiving a late payment. My client was assuming this was standard practice and relied on the XYZ agency to call my client. Your honor the XYZ agency created a benefit to my client and in a way created an implied contract. Part of complaint is based on the doctrine of quasi contracts, the benefit was received was desired, the XYZ agency created an obligation, even though the XYZ agency was not receiving extra compensation can not be a reason for the XYZ agency not to continue their obligation. Therefore the XYZ agency failed on continuing with their obligation, an obligation they themselves created. And on and on he would go.

So those clients that were a PITA, the ones that wasted time, the ones that you saved and extra $1,000 a year could end up costing you:

A. The cost of your E&O deductible
B. The increased cost of the new increase E&O renewal premium

So in my little head, the general public late payers are not part of my book.

It's kind of like taking some of your neighbors land by adverse possession. Your actions, through what you do or don't do can mean you gain or lose land. You do someting long enough and it becomes to be expected, to the point that you can legally take that land. Plus add on tacking and it gets easier. If the previous owner did something long enough, like mowing a strip of your land, they sell to new owners, those owners can legally assume that to be their land.

The eyes of the law are not always what you and I think to be fair and eqitable.

We make/keep phone logs to protect us, not just to be able to read it back to the client but to show proof that yes indeed this is our business practice. If you keep only one phone call, once in a while, that would not be good proof that you do make a record of conversations. You are in court trying to defend yourself, showing that yes indeed my business practice is that I always make a record of calls, yes indeed I did inform my client, you show hundreds of records from other clients to prove that it is your practice to make phone records. This would be proof that would help the judge believe your side of the story.

I agree with other posts. It is an all or none, do it every time and never forget situation. Personally it isn't for me. Things can go wrong and one less cog in the wheel that may break is less stress for me.

Here's a good one about the adverse possession.......
http://www.courts.state.pa.us/OpPosting ... 2002mo.pdf

This is more of a matter of do it for ALL customers or don't do it for any of them. Its one way or the other.

In terms of find a "case" you can hang your hat on, you might have to search hard and wide. Best bet it to contact one of the industry Insurance Agents E&O experts and pose the question to them.

You may not find a case if the carrier in investigating the case, taking depostions and determining the liability of their insured determines that there IS LIABILITY and subsequently settles then it will never "hit the books". Its more of a pattern of activity, what are your procedures, do you follow them and have you documented your file.

Direct bill was intended to take the collection process out of the agents hands. The company sends a bill with a due date and then sends out warning (notice) of pending cancellation if it was not paid by a specific due date. That is pretty clear to me! Agents complain that carriers are dumping more responsibilities in our laps and lowering our commissions at the same time, which reduces our profit margin and forces us to work harder for the same $$$$'s and yet we are trying to TAKE ON MORE?

Credit underwriting has merit. If people aren't responsible enough to pay their bills on time, then they are more likely to suffer a loss. So getting rid of the late payers is good risk management and should reduce our loss ratio with that carrier, right?

I personally do NOT expect my agent to call me if my insurance premiums are late. I do expect a direct bill notice of cancellation if I don't meet the due date. I think by calling we perpetuate one of the core problems in the US, people are NOT responsible for their own actions.

Ok.. time to step down and yield the soap box to the next person...

[superdash8]

Other than the E&O issues involved in calling bad pay clients, there is also the morale issue. Clearly if they don't care enough to pay insurance on time, then what else don't they care about? Or perhaps they are having financial difficulties, which is no better. Further, as most of you must know already, some clients "learn to play the late pay game". By calling them we are only enabling them to continue this bad business practice. I do agree however, that if it is completely out of character for a certain client, then it is just plain old good service to call them. We have done this on occasion, and once we found out sadly that the client had passed away. The widow was very appreciative that we cared enough to call. It's Just one of the risks of running a caring and warm business. It pays in the long run. Sometimes I think insurance people are too scared of being sued.

On another note, I think it is pointless not to show your designations. If you were to end up in court it would not take the opposition very long to find out that you hold designations. Then question becomes, 'well then why were you hiding the fact that you were a CPCU, CIC or whatever'.

[d's insurance store]

The legal terminology referred to here is 'Estoppel', which means setting a precedent for certain behavior and practice, and allowing both parties to the action to rely on that continuing behavior to govern the agreement. (NO, I'm not an attorney, nor paid to act like one...but I remember this term and its associated warning from acting as a landlord, where the warning is to allow a tenant to continuously pay late without consequence, and then wake up one day and decide enough is enough and try and enforce previously unenforced provisions).

Still, as challenged in the prior post, there are apparently no E&O references to the original question known to anyone contributing on this topic.

[etimer]

I'm not saying I won't ever make the call. If it is out of character for a certain client I will make a call.

Other than the E&O issues involved in calling bad pay clients, there is also the morale issue. Clearly if they don't care enough to pay insurance on time, then what else don't they care about? Or perhaps they are having financial difficulties, which is no better. Further, as most of you must know already, some clients "learn to play the late pay game". By calling them we are only enabling them to continue this bad business practice. I do agree however, that if it is completely out of character for a certain client, then it is just plain old good service to call them. We have done this on occasion, and once we found out sadly that the client had passed away. The widow was very appreciative that we cared enough to call. It's Just one of the risks of running a caring and warm business. It pays in the long run. Sometimes I think insurance people are too scared of being sued.

On another note, I think it is pointless not to show your designations. If you were to end up in court it would not take the opposition very long to find out that you hold designations. Then question becomes, 'well then why were you hiding the fact that you were a CPCU, CIC or whatever'.

[insaw31]

I know the question was about E&O...but there is another variable here...how much TIME are you spending on the phone calls / letters, etc? Can you spend that time in a more profitable way? I personally dont want to wait around for a precedent...I assume there is an E&O exposure and have been advised by many people in the industry as well. But the more omportant thing to consider is the overall profitablity of the practice...we found that we were spending more time on the late payers than on the good payers...how does that make sense?

[philly79]

I know this is going to sound crazy, but I usually call the client and simply do not document it in the file.

I work for a very large broker, and it is company policy not to contact clients regarding late pays due to E&O concerns. However, I have a relatively small book of large accounts. I know all of my clients very well, and I know they depend on me. They trust that I will look after them and their policies. If a policy should cancel for non-pay, I would lose some trust with the client. Trust = Retention from my experience. I cannot afford to look incompetent on a $20K account.

That being said, my situation is probably not typical, since most of my clients have a very high net worth and therefore I rarely see a late pay notice. Although even rich people sometimes just forget, or mis-place their bills.

[d's insurance store]

Your point is well taken, and if I were dealing with $15K+ accounts, I'd be on the phone every quarter to make sure things were going well.

I think the gist of this discussion concerned the small personal lines and commercial accounts, where the client has migrated into the land of continuous late pay and appears to never open their mail to view normal bills or late notices and instead relies on the agent or CSR to 'tell' them when to pay. Considering that there are many opportunities for clients to hook up with automatic deduction payment, this agency behavior tends to become chronic for the same people and the obvious questions becomes striking a balance between retention and enabling bad behavior that costs an agency time that could be better spend acquiring and servicing a client base that has a higher performance score.

[etimer]

You are not following company policy and creating E&O exposure. I don't want to sound mean but for me, you would be looking for a new job as soon as say........yesterday.

Yes not documenting calls does sound and IS crazy. If you like your job you should clean up your act.

But since it is a rare, not normal occasion for you, it would be good to talk with management about it. I guarantee you they want to know that you aren't following company policy. What next, you make it your policy to issue a COI with AI status before it has been added to a policy. Over the years agents have found themselves in deep, hot water over trying to keep their trust. When something goes wrong, these people and their attorney will show you how far that trust will go in court.

I know this is going to sound crazy, but I usually call the client and simply do not document it in the file.

I work for a very large broker, and it is company policy not to contact clients regarding late pays due to E&O concerns. However, I have a relatively small book of large accounts. I know all of my clients very well, and I know they depend on me. They trust that I will look after them and their policies. If a policy should cancel for non-pay, I would lose some trust with the client. Trust = Retention from my experience. I cannot afford to look incompetent on a $20K account.

That being said, my situation is probably not typical, since most of my clients have a very high net worth and therefore I rarely see a late pay notice. Although even rich people sometimes just forget, or mis-place their bills.

[BIG D]

We don't do this either. We have two companies that constantly send mail to the wrong agent. Can you imagine if a Non-Pay cancel notice got sent to the wrong agent and we didn't even know about the Cancellation? We have a company that sends a Blue cancel notice and the Final notice is Red. We have had customers tell us they wait until the bill is red before they pay. I'm sure if they get into the habit they won't pay until the agent phones.
I can see this as a real E & O Exposure but have no knowledge of any cases, but I don't go looking for them either.

[RMCSUSNRET]

A specific experience;

Our agency had a client a number of years ago that had a very poor pmt history. At that particular time our personal
lines csrs were calling on late payments. This lady had a pmt due on a friday afternoon and no one called. Policy cancelled and lo and behold she was in an accident on saturday which included both bi and pd. She called in the claim and found out that her policy had cancelled for non-pay. She then called me and stated she was going to sue. I explained to her that what we were doing was a courtesy and not required. Thank god she never followed up and found one of the ambulance chasers. We no longer call anyone except for a very few.

RMCSUSNRET

[mhutch69]

Again,

after 30 years of this practice of contacting late payments in primarily non-std. auto insurance, we have never been close to having a problem.
I can not tell you the amount of business that would have fallen off the books if we did not practice this retention method. I am fine with testing whether or not our phone call justifies the customer NOT paying EVEN after receiving several notices including the legal notice of cancellation.

Upon evidence of mailing of the legal notice of cancellation, ask any company if the agent action of phoning or not phoning can cause that notice to be invalid. I would guess the company would tell you it stays canceled regardless.

NOw, I do know that some lawyer will find a method to allege we did not consistently do "our" job, but our argument is that it is NOT our job to call them NOR did we guarantee we would do such a thing during the policy period. Therefore, there is minimal legal standing for the customer to say that after 3 notices advising of the pending cancel, he WOULD have paid if ONLY WE HAD CALLED?????

I will keep retaining my business any way I can.

[wlunday]

I agree with mhutch69.

My staff and I go out of our way to retain business, and our persistancy is excellent. However, there are times when I want a customer to leave, and instead of phoning and reminding them to pay I send them a nice letter stating that "I'm sorry you choose to move your coverage elsewhere, please have the new agent call us if they have any questions..." And I don't invite them back.

Many of our late policies are inter-related with others... maybe a secondary home premium got overlooked, or a policy on the family boat... do you want them to talk to a different agency for this stuff and put all the rest of the business at risk? No. In my small town these are my friends and neighbors. We follow the "Golden Rule".

Swymmer

[jtharpo]

Once again I ask for an example of one, ONE case where someone has acutally lost money, settled out of court, had to pay their E&O deductible, anything. There is nothing that anyone has come up with so I feel like this is a case of insurance urban legend. In today's changing economy and with the internet companies must find ways to stand out and work for their clients. So for all of you who will not be making these calls I say thank you for I now have a means to stand out from the competition.

Thanks for all of your posts.

Have a great day!!