Are Your Insurance Agents Making These Common E&O Mistakes?

Are Your Insurance Agents Making These Common E&O Mistakes?

Highlights:

  • Errors and omissions claims can be costly when agents make errors.
  • Errors can occur both on behalf of clients and in dealing with the agent’s own errors and omissions policy.
  • Some common errors include incorrectly identifying risk, poor communication, and mishandling of an E & O claim against the agent.
COVID-related business interruption is prompting higher E & O claims rates

Errors and omissions insurance is hugely important to insurance agencies. It’s both important to be sure that your clients have the errors and omissions coverage that they need, and that your agents also have the correct E&O coverage. Take a look at what you need to know about the kinds of mistakes that can lead to costly payouts for your agency.

Failing to Identify Exposure

One big way for an agent to get slapped with an E & O claim of their own is by failing to identify a client’s need for coverage. It’s very important for an insurance agent to be aware of the risk factors that a client is facing. Failing to realize a given risk factor can lead to serious under-coverage.

Of course, not all claims of failing to identify exposure are valid. Currently, many businesses are trying to file business interruption claims because of COVID-19, but insurers are fighting back, with many claiming that their policies have virus-related exclusions.

It’s unfair to think that insurers or agents could have predicted an unprecedented global pandemic. Other types of risk, however, are more predictable, and coverage for these should be implemented, or at least offered. Making sure that agents are tested to evaluate their skill in risk assessment and retrained if they fall below a certain threshold is one way to ensure that your agency avoids these claims.

Failure to Communicate Information Accurately

Communication is key to a successful agent/client and agent/insurer relationship.

Agents have to do a lot of communicating. Here are a few examples:

  • They share policy details with the client.
  • They explain policy terms to the client.
  • They relay policy changes with the client.
  • They report claims details to the insurer.
  • They follow claims and make sure that involved parties stay informed.

Any failure to communicate vital information is potentially actionable, especially if it causes a negative outcome. Agents need to be skilled communicators who pay close attention to detail. They also need to set up a process for collecting necessary information and informing clients and insurers. Following the same procedure each time ensures that no important need is overlooked.

Failing to Understand E & O Procedure

Sometimes, even agents who are good at handling their clients’ claims don’t handle claims against themselves as well as they could. E and O claims happen in the career of an insurance agent, and it’s crucial that agents understand how to manage them.

Knowing when to report a claim or potential claim is a good start. (Hint: It’s as soon as you become aware of it.) It’s never a good idea to wait on reporting a claim and hope that it will go away on its own. Agents also have to understand that they can’t admit fault or agree to make any payments on their own. A careful reading of the agent’s own E & O policy can help.

The American Agents Alliance can help your agency learn more about E & O claims and how to best serve your clients’ errors and omissions needs. Contact us to learn more about E&O insurance.

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