E&O Insights: How to Minimize E&O When Selling Employee Benefits

By | December 2, 2013

Agencies involved in the sales and service of employee benefits know that the issue of errors and omissions (E&O) is very real — and that proper steps must be taken to minimize that exposure. Many in the employee benefits field recognize that the changes brought about by the Patient Protection and Affordable Care Act (PPACA) will likely result in new emerging issues and E&O exposures. Absent the issues evolving from the PPACA, consider some steps agents can take to minimize the chances of their agency facing an E&O claim.

Training and Education

Providing staff with the necessary knowledge is vital to an agency’s daily and long-term success. Training and education should be part of an agency’s culture. This is important from the beginning of a person’s career, to the end and every day in between. Training and education will enable the staff to handle their various duties accurately and professionally.

Some educational resources to consider include:

The employee benefits proposal can be a key document when an E&O claim is made.
  • Industry publications;
  • Training provided by your carriers and the wide range of high-quality industry seminars;
  • Achievement of designations based upon the employee’s specific area of responsibilities.

Each year when management meets with the staff to discuss their prior work performance, look to include an education goal. This should be agreed upon by the employee and his or her supervisor to be completed within a specified time period. This will ensure that training is not only ongoing, but that key areas for improvement are addressed.


When you look at the carriers you deal with, there will be a host of differences between them. Those differences may involve underwriting guidelines, underwriting appetite, policy forms, workflows and information requirements. What’s more, the terminology one carrier uses may not mean the same thing as another carrier’s terminology, or different words or phrases might be used to describe the same thing.

Carriers’ financial ratings could vary, too, so look to include the most current rating on proposals. Use the exact definition of that rating as provided by that rating organization.


When your agency deals with prospects or customers and provides them with details on plans through some of their markets, accurately communicate all necessary details and specifics. In addition, printed material that provides detailed coverage information must be checked for accuracy. Using the carriers’ benefit brochures, where possible and viable, is helpful. Just make sure to use the most current ones. An agency could be held responsible if it provided a customer with incorrect material.

Caution also should be exercised when verbally communicating with customers, whether on the phone or in person. As with printed material, an agency could be held responsible for comments made.

When interacting with a prospect or customer, always document all discussions in writing back to the customer. The goal is to ensure a common understanding between what the agent and the other party discussed and resolved. Plus, where possible, provide the customer with options, such as different plans or maybe different deductibles or co-pay options. Providing the customer with education and options will allow him or her to make an educated decision based on the objectives the customer is looking for the employee benefit plan to accomplish.

Technology and Compliance

In the employee benefit arena, it is fundamental that the confidentiality of PII (personal identifiable information) and PHI (personal health information) is protected at all costs. Because the agency management system is probably where that information is stored, an agency’s system should be set up to only allow individuals access to the information based on their specific job duties.

The agency should require any documents containing PII/PHI to be locked up at night, as this will protect against others, such as the cleaning crew, from seeing this information. Have a set procedure, too, for discarding paper that contains PII/PHI. Using commercial-grade shredders or subscribing to a shredding service is recommended.

Security is crucial. That includes compliance with federal regulations and taking the necessary steps to ensure that established encryption standards are being met. Issues include quoting, requests for information and more. When communicating with prospects or customers via email, for example, extra caution must be taken to protect the confidentiality and sensitivity of this material.

Document. Document. Document.

Prompt, professional documentation is critical. This will determine the direction an E&O file will take. Documentation needs to be:

  • Timely (as soon as possible);
  • Handled by the person who had the conversation;
  • Specific. Details are essential. Who did the agent speak with? What specifically was discussed and resolved? Are there any open items? Are there any issues that the agent needs to put on diary as a follow up?

The Sales Process

To ensure consistency, the agency must have a documented process/checklist/workflow chart detailing the steps that must be followed. This list should be adhered to, with each step documented as to who performed it and when.

Among the goals is to develop a renewal action plan for each account based on its complexity and potential changes the customer may be interested in pursuing. The approach should be customized based on the account. The account team should meet far in advance to discuss the account and how well the current plan is meeting the customer’s objectives. Because these objectives may change based on the management of the account, give serious consideration to including the customer in the meeting to better understand what he or she wants to accomplish via the employee benefits program.

The employee benefit arena is not only data-sensitive, but it is also heavily reliant on good quality data to properly price the account with appropriate conditions/limitations, etc. Securing the correct and updated underwriting data is obviously imperative. This requires the data to be of high quality (with the necessary detail) and accurate. To ensure a high-quality data submission, secure the data directly from the account via application/census report/RFP, etc.

The proposal can be a key document when an E&O claim is made. As a result, a strong focus of the proposal is to address how the various products will perform and what level of service will be provided. It is best to use a standard proposal format, as this will ensure the information is complete and properly presented in a consistent approach. Due to the uniqueness of some of the terms used in this industry, it is highly recommended to include definitions and explanations of important terms. Include a disclaimer, too, as this serves an E&O prevention role.

Bottom line, selling employee benefits has definite E&O exposures that can be minimized with some loss control measures.

About Curtis M. Pearsall

Pearsall is president of Pearsall Associates Inc., a risk management consulting firm. He is also a special consultant to the Utica National Agents E&O program. Phone: 315-768- 1534. Email: curtis@pearsallassociates.com. More from Curtis M. Pearsall

From This Issue

Insurance Journal West December 2, 2013
December 2, 2013
Insurance Journal West Magazine

Program Directory, Volume II; Quarterly Employee Benefits Brokerage Report