Ancient Greek philosopher Heraclitus is credited with the quote, “There is nothing permanent except change.” The ever-changing landscape of the insurance industry makes it imperative that agents stay abreast of major trends, legislation, and the impact on their livelihood and their clients. For those independent agents who are proactive about responding to change, all indicators point to a bright future within the IA distribution channel.
The evolving nature of insurance follows a pattern of equally evolving societal changes: Homes have gotten smarter. Cars have become computers on wheels. Personal data is now in the cloud and businesses are increasingly mobile and decentralized. These realities impact the type and scope of insurance coverage needed, and insurance agents must be diligent to protect their clients, and themselves, from unnecessary and costly errors.
Errors can result in legal disputes that trigger claims against the agent’s Errors & Omissions insurance policy. These costly claims typically fall into one or more of three categories:
- Failure to explain or secure coverage
When agents get sued, often it is because the client suffered a loss for which he or she believed there was coverage. Whether the lack of coverage was due to an error in processing paperwork, improper explanation of coverage to the client or the agent failed to procure coverage the client thought was included, agents can find themselves open to damages.
- Administrative errors
The easiest errors to avoid are often the simplest and most common, such as incorrect information entered on a form or a failure to update key information at renewal time. Often, these errors occur when there is a communications breakdown with agency staff or thoughtful review of client documents is shortchanged.
- Failing to recommend proper coverage
While agents aren’t required to anticipate or identify every possible risk to their clients, they can be held liable if their risk analysis falls short of providing adequate advice, products and services to the client in addressing their realistic risks.
Best practices independent agents can follow to protect themselves from E&O claims, and in the process, protect their clients, include:
- Agents must have a clear and detailed understanding of the insurance products they are offering. If the agent isn’t clear on the details, the client likely will not be either.
- Whether issuing or renewing a policy, agents should carefully explain the specifics of the policy: what’s covered, what isn’t and make certain the client understands the coverage limits.
- At renewal, agents should be prepared to discuss policy changes with the client, including how and why premiums are increasing if applicable.
- Standardization and documentation of process reduces the likelihood of errors while also ensuring key documents and communications between the agent and client are maintained. Agents can accomplish this by using a range of agency management systems that create sharable, accessible tools for everything from agency procedures to recording of client email and phone communications.
- Education in a world that is constantly changing is critical to the success of an independent agent. Understanding products and services available, the evolution of basic risks, as well as knowing how to assess a client’s unique coverage needs, requires agents to stay current with trends, technology, and regulatory and legislative initiatives.
The world, and its inherent risks, is changing. Agents who work to keep pace with trends and emerging risks that impact their clients will have a distinct advantage. Those who do so by following industry best practices will also minimize their own risk exposure in the process.