E&O Insights: How ‘E&O Proof’ is Your Agency?

By | January 13, 2014

Another year is in the books. As your agency reflects on the past year, how would your answer the following question: Are you a better errors and omissions (E&O) risk today than compared to a year ago?

Many issues factor into making this determination.

In recent industry surveys, the overwhelming majority of agencies reported an improvement over the previous year. This should be every agency’s goal.

A key aspect of E&O loss prevention involves maintaining a culture of constant improvement, so it is best to evaluate your agency on a continuum. Because you may not know where the end is, the goal is to be confident that you are making progress and improving.

An insurance agency's E&O culture starts with its management.

Look at the following areas and determine whether your agency realized some E&O growth in the past year.

Management and Leadership

An insurance agency’s E&O culture starts with its management.

Is management clearly and frequently showing its E&O commitment by “walking the walk” and “talking the talk?”

Without this commitment from leadership, it is highly questionable whether staff will embrace a strong E&O culture and achieve the desired level of commitment.

Staff Commitment and Education

In the world of agents’ E&O, this is a significant area because agencies don’t make mistakes, people do. Very simply, every staff member must perform his or her duties ethically and professionally.

The work of an agency’s staff involves many different functions and disciplines, so assessing the culture requires an assessment of each person.

Ideally, each member of your agency had an “E&O goal” in the past year. Maybe this involved technical or sales training, or attending an E&O class.

Did every member of the staff accomplish his or her E&O objectives and grow in his or her E&O commitment?

Technical proficiency is vital, and the start of a new year is the perfect time to assess each staffer’s technical level. Your customers count on the staff’s expertise on a variety of insurance matters. How your staff responds to customers’ questions is important. In addition, training in the areas of sales, customer service and systems is imperative.

As you develop goals for the new year, identify educational opportunities based on your assessment.

For producers and customer service representatives, look to make effective use of the agency’s exposure analysis checklists. Checklists are excellent tools for becoming educated on more than 650 different SIC codes, as well as the various insurance issues and exposures.

Educating Your Customers

Was your agency more active this past year in educating customers on the various coverages and how these coverages respond?

There are many approaches to accomplish this, including newsletters and using social media. Consider sending a weekly “Did you know?” message.

Another great approach for educating customers is to perform an annual agency review for each of them. This will help your customers understand their coverages and may also identify any exposures that are not properly insured.

Do you know when and where the next “Superstorm Sandy” will occur?

No one does, but by taking the time to discuss these issues before a loss occurs, you stand a much better chance of your customers not experiencing any “surprises” should a claim develop.

Proper Procedures

Would you say your level of documentation has improved in the past year?

Is documentation handled accurately, promptly and professionally?

Two good rules of thumb regarding documentation are:

  • Another staff member should be able to review the documentation and exactly know the account’s issues and open items.
  • If your documentation was displayed for a jury to read, you wouldn’t cringe at the revelation of it.

Other questions to consider include:

  • Did your agency institute a cover letter that goes out with all policies?
  • Do you have any procedures that are a cause for concern? If so, this is the time to resolve these issues.
  • Does the agency provide limit options for customers? This forces customers to make a decision on what limit they want and those they don’t.
  • Does your agency have a procedure that attempts to perform an account review for each customer?
  • Is your agency using a standard template for the proposals you provide? Consistency is important.
  • Have your proposals been enhanced with some explanations and definitions of key words and phrases? This will not only help educate your customers, it will help make your customers more accountable for their buying decisions.
  • Are your producers securing sign-offs from customers for unwanted coverages?
  • Does your agency have an audit program? To truly assess the E&O culture and commitment of your agency staff, it is necessary to review their files to determine how well they are adhering to agency procedures.
  • Is your agency holding periodic staff meetings? These have been shown to be effective in ensuring that all staff members are on the same page on various issues.

These points are just some of the areas that will help to determine whether your agency is making progress in its E&O commitment.

Significant Improvement

Hopefully, you can reflect on the past year and feel good about the progress your agency has made. If you believe your agency went backward, which does happen, work to make 2014 a year of significant improvement.

Identify three or four strategic improvements you want to make for the new year, and assess your insurance agency’s E&O culture each quarter to determine whether progress is being made.

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

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Insurance Journal West January 13, 2014
January 13, 2014
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