In this monthly prevention tip claim scenario an insurance agent wrote a large life insurance policy for a 40-year-old client and advised the client to purchase a premium waiver in case of future disability. The client rejected the rider. Years later, the client was injured in an industrial accident and became totally disabled. The client notified the life carrier that he was unable to pay his premium due to inability to work and requested a premium waiver. The carrier responded that the policy had no such rider and the policy ultimately lapsed due to non-payment of premium. As a result, the client brought a claim against his agent for not providing adequate coverage. The agent defended on the basis that the client rejected a premium waiver, however, he didn’t have this in writing. Due to the lack of documentation in the client file, the agent's E&O carrier settled the claim.
Loss Prevention Tips
Failure to maintain proper documentation always puts agents at risk in the event of a claim. Good documentation is your first and best line of defense to any client claim. Use care in explaining the terms of any coverages purchased to your clients, especially coverage exclusions. At the end of the meeting, confirm with the client exactly what he bought, and always document in writing any coverage requests and/or declinations of important coverages or limits by clients with copies delivered to the client and filed in the client file. All binders should be issued in triplicate with the original copy sent to the insured, a copy to the company and a copy to the client file. At delivery, review the policy terms and confirm in writing with the client that they reflect the coverage sought by him. Proper documentation allows client disputes to be addressed quickly, calmly and effectively with minimal negative impact on time, costs, reputations and relationships.
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