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10 Procedural Mistakes Agencies Make That Cause E&O Claims

  • Post category:E&O

Agents have tons of things to do each day, and each one can be vitally important to your agency. These day-to-day tasks, like managing your customer’s data, cold calling prospects, and making policy changes, are often highly regulated and need to be correct.

Don’t let costly procedural mistakes lead to E&O claims at your agency. Read our ten tips about avoiding common agency management errors. Then review your E&O coverage to make sure you have enough when you need it.


10 Procedural Mistakes Agencies Make That Cause E&O Claims

Good housekeeping practices matter when it comes to reducing your exposure to E&O claims. Check your agency procedures to avoid these ten common errors:


1. Review policy documentation carefully.

Small things tend to be overlooked, but it’s those little things that add up. Check to be sure your policyholder has signed and dated their application, for example. This small but critical detail helps show that your customer read their policy when they purchased it — crucial for your E&O claim defense. Each agency should have an experienced person reviewing all policies for errors. The larger the policy, the greater the potential E&O claim.


2. Establish procedures for client refusals.

Make sure your client signs coverage refusals when they decline higher coverage limits or additional endorsements you recommend. Insureds don’t usually remember everything you offer them, so having their signed declinations on file can help your agency’s defense against E&O claims.


3. Standardize your agency communications.

Use templates or standard letters for essential client communications. Standardizing communications ensures everyone at your agency does it the same way — and each client receives the same message.


4. Set up a rigorous training schedule.

When new agents join the agency, structure their learning, so they have thorough, updated training. Don’t let them start advising customers before they’re ready, and make sure to document training classes. Members of the American Agents Alliance receive valuable discounts from nationwide training partners.


5. Update employee documentation.

Many agencies are small and don’t have a dedicated HR person, but it’s still important to have employee documentation. Make sure you have an employee handbook — and that it gets updated as laws change. Have employees sign off on training they attend and policies they read. Include job descriptions in your employee’s files and review expectations openly.


6. Automate where possible.

Automation is taking the insurance world by storm. As an agent, you have lots of opportunities to take advantage of new technology and tools. Consider investing in chatbots to streamline communication or document scanning technology to help review applications. Insurance operations tend to involve lots of manual data entry — and each human touch can lead to mistakes. Using technology to reduce the manual work your employees do can reduce errors leading to E&O claims.


7. Remember to include automated processes in your SOPS.

Don’t forget to update your written procedures when you automate. Add details about how information is transferred and kept secure. Ensure you’re still meeting regulatory requirements when you automate and keep written records of your new processes.


8. Establish internal quality reviews.

Have someone in charge of quality who does regular audits of your files. Being proactive and reviewing your own work can save you fines and potential E&O claims since you’ll find errors first – and be able to fix them before they become a bigger problem or trend.


9. Follow your agency’s claim process.

Make sure to establish and follow your agency’s claims process every time. Have a system in place to report claims promptly to the carriers. Be sure you’re giving a consistent message to policyholders and explaining your role and the carrier’s role. Having a claim is stressful for insureds, so having a process in place for how you will help them means you can act thoroughly each time. Your policyholder relies on you during the claims process, and it is the moment of truth for agents – the time when customers need to cash in on the promise of coverage from the insurance company. Make sure your agency’s claims procedure is current and followed for every claim.


10. Sign contracts with independent contractors and other agencies.

If you refer business to other agencies or use freelancers to fill roles at your agency, use written and signed contracts to establish the parameters of the relationship. Define how work will be performed, how the independent contractor will be paid, and your expectations clearly. Keep a record of these contracts and make sure to communicate clearly with your freelancers.

Good agency management often means paying attention to the details. Crossing these procedural Ts and dotting the Is will help your agency reduce potential E&O claims — and could increase customer satisfaction with your agency at the same time.


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