Insurance agents have a number of responsibilities. They need to be knowledgeable about client needs as well as the details about the products they sell. They need to pay careful attention to the appropriate coverage to recommend so that they meet the needs of their clients. In order to avoid liability and avoid claims under their E&O insurance policies, insurance agents need to develop a business code of conduct and reduce it to writing in an Office Procedure Manual. This will ensure that employees know what is expected of them and that their actions are according to the office policies. The manual should be easily accessible to all personnel and, if possible, a copy should be provided to each employee. An "office procedures" manual should contain, at a minimum, the following:
Agency Standards: Establish protocols
How the telephone is answered and how messages are recorded and provided to the agent
How to handle the phone call if no specific agent is requested
Procedure for handling payments whether by cash or check
How to process incoming mail, including stamping it with date and time it is received
Include standard letters and memos in the manual and outline when each should be used
Maintain meeting reports that can be easily accessed
Have a policy of how to deal with client complaints and negative comments
All who are working in the agency should have a job description so they know the expectations of the agency
Establish the scope of authority for each employee
Require employees to attend all staff meetings
Standards for Maintaining Files
Each client file should be maintained in the same way including separate sections for the application, policy and client correspondence.
Comply with state requirements for retaining records.
Suspense or Tickler System that Facilitates Follow-up
Every action that needs to be taken relevant to a file needs to be diaried and the file itself needs to be labeled with a date and the action that needs to take place on that date.
Every morning, the diary needs to be checked to see what needs to be done. Establish a method for documentation that verifies the task has been completed.
Main issues that should be addressed include:
Correspondence received that needs follow-up or a reply
Any changes that need to be made on the status of a client account, including renewals and any changes in coverage
Action that needs to take place relevant to an expiration date
Any new business that is pending
Here are some examples of E&O insurance claims due to inadequate office procedures. The best way to understand the importance of established office protocols is to review E&O insurance claims that could have been avoided with complete and adequate established office procedures.
Claim Description: A client called his long-time agent to ask that his daughter and her new car be added to the policy. The client also mentioned that he expected to delete his pick-up truck from the policy within a few days because he was selling it. The agent told the client to call back when the truck was sold. The agent planned on adding the daughter and her car when he made the changes for the pick-up truck. Three months later, when the client called to report that the daughter had totaled her new car, it was discovered that the daughter and her car had not been added as requested.
Estimated claim cost: $15,000.
Prevention Tip: Immediately act on requested policy changes and use the suspense system to follow-up on potential changes.
Claim Description: After a new client assured an agent he had a valid driver’s license, the agent provided him with a quote for six months coverage, collected a cash deposit and issued a binder. Two days later, a DMV report indicated the client was driving with a suspended license. Several letters were sent to the client and his bank rescinding the binder. Attempts were made to call the client but he could not be reached. The agent failed to return the premium paid as a deposit for the policy. Four months later, the client reported his car had been totaled. He and his bank both denied receiving any letters rescinding the policy.
Estimated claim cost: $10,000.
Prevention Tip: Establish an agency-wide policy for client notification of policy cancellation. Include a procedure for refunding premiums and send notices by certified mail.
Claim Description: An agent had his assistant use his computer to print out an automated generic summary of a BOP policy and mail it to the client. The agent failed to check to be certain the mailed summary mimicked the actual coverage that had been purchased. In fact, the summary referenced three specific types of coverage that had not been purchased and neglected to inform the client of a change in his third-party coverage. The client suffered a loss that was not covered by the insurance he had actually purchased, but the generic summary had claimed he was covered for the loss.
Estimated claim cost: $7,300.
Prevention Tip: Make certain that one of your established office procedures includes comparing generic documents and summaries with the actual coverage purchased.
Claim Description: A client requested an agent to provide her a homeowner’s policy and made a $100 down payment on the premium. The woman made several phone calls to check on the status of her application and was consistently told by the agent that it had been sent to the carrier for processing. Two months later, when the client’s house burned down and she submitted a claim, it was discovered the application had been misfiled and never processed.
Estimated claim cost: $50,000.
Prevention Tip: When clients call for information about their application or their coverage, even if you think you know the answer, review the file or check for answers on the computer before answering even if this means you will need to call the client back.