Top Causes of Agent Errors and Omissions Claims
Why do indemnity agents get sued ? typically, it ’ mho because they do or say the faulty things, creating a fiscal loss for their clients. however, “ amiss ” can result from many unlike actions or statements and can vary based on an agent ’ mho license type .
For example, if you ’ re a P & C indemnity agentive role, studies suggest the one thing you don ’ thyroxine want to do is fail to procure coverage for your clients. According to research on members of the Independent Insurance Agents & Brokers of America ( IIABA ), bankruptcy to procure coverage accounts for about one in five E & O policy claims against P & C insurance agents … or 24 percentage to be precise .
The reasons policy agents “ drop this ball ” are complicated. possibly they failed to do a careful hazard analysis and glossed over an important policy need. Or possibly they shopped risks to their markets, but failed to find an insurance company with a sufficient underwrite appetite. But then they never documented it or kept clients informed. Or possibly they secured an indemnity binder, but because of an administrative bug, never locked down permanent coverage .
Whatever the reason, bankruptcy to provide indemnity is the single largest lawsuit trip for P & C insurance agents. now that you know this, you can avoid making this error yourself. How ? By always. ..
- Doing a thorough risk analysis for your clients,
- Diligently shopping for needed insurance, and
- Competently quoting, selling, and installing suitable insurance solutions.
But what about life and health policy agents ? obviously, failure to provide international relations and security network ’ thyroxine as big an E & O deal for them as it is with property and casualty agents. alternatively, according to a survey of agents belonging to a major life industry trade group, misrepresentation accounted for 25 percentage of claims, making it the largest one source of claims for life/health insurance agents .
Misrepresentation doesn ’ deoxythymidine monophosphate always refer to lying about a biography product ’ mho features and benefits. It besides can involve misstating how it works. arsenic long as you create a misperception about a product ’ s features and benefits and the customer ’ south purchase results in a fiscal loss, you may be guilty of falsification .
Why does it appear to be a more coarse E & O policy claim trigger for biography and health indemnity agents than for property and casualty agents ? The research doesn ’ t say. however, possibly it has to do with the greater complexity of certain life products vs. property and casualty indemnity. With the latter, you merely need to identify the gamble, quantify the loss potential, shop the coverage, and then work with clients to get the policy issued .
Life policy, on the other hand, may be more intangible and complex. For example, policies sold for estate-planning or business buy-sell purposes can be highly complicated. Giving a customer the misguided impression that a life policy will generate certain tax benefits when it fact it doesn ’ thyroxine can have damaging consequences former. even botching your explanation of annuity capitulation penalties might lead a customer to believe he can get his money out of his policy penalty free rather of having to wait seven or eight years. Having to pay thousands of dollars in unexpected fees will often result in complaints, lawsuits, and E & O policy claims.
If you ’ re a biography or health indemnity agent, how can you avoid misrepresenting your products ? Start by mastering your portfolio. then during your display meetings, spend sufficient time explaining how your proposed solution works and encouraging your prospects to ask questions. besides, be sure to cautiously review contract provisions at the time of policy delivery. By giving your customers multiple opportunities to learn about what they bought, you will largely immunize yourself against misrepresentation-related lawsuits .
Failing to provide insurance and misrepresenting one ’ s products cause big E & O headaches for P & C and life and health agents, respectively. however, even though they each report for roughly a quarter of all Errors and Omissions insurance claims, there are many early claim triggers. here are the main ones in regulate of frequency for each agent type .
Top causes of claims for P&C insurance agents:
- Failure to carefully explain policy provisions (7 percent of claims).
- Failure to adequately identify exposures (6 percent).
- Failure to recommend coverage (5 percent).
- Sending inaccurate or incomplete client information to an insurer (5 percent).
- Failing to provide timely notice of a claim to the insurer (4 percent).
Top causes of claims for Life and Health insurance agents:
- Failure to provide insurance (13 percent of claims).
- Failure to explain coverage effectively (11 percent).
- Making an administrative error (11 percent).
- Failure to make a requested policy change correctly (9 percent).
- Calculating a premium incorrectly (6 percent).
Regardless of whether you ’ re a P & C agent or a life and health agent, the key to preventing E & O insurance claims is education, focus, and follow through. Specifically, strive to. . .
- Work hard to uncover client needs and make suitable product recommendations that fulfill those needs.
- Educate your clients about their insurance options.
- Make sure your customers understand the insurance policies they’ve purchased.
- Adhere to fact-based sales practices and comply with all industry regulations.
- Avoid making promises to clients you can’t keep.
- Execute all client service requests promptly and accurately.
- Establish good will with all your prospects and customers and work hard to maintain cordial relations with everyone you deal with.
It ’ s not glamorous, but excelling at the basics of selling and servicing your P & C and life and health indemnity clientele will closely constantly prevent lawsuits. We can ’ triiodothyronine predict you that doing your job correctly will keep you out of court every clock time. But we can assure you it will keep your legal problems to an absolute minimal. And deoxyadenosine monophosphate hanker as you keep your E & O insurance in force, you will have a fiscal catcher in case you do get sued and lose your lawsuit in court. good luck !