agency operations

Agency Operations

Learning Objectives

• We will review the learning objectives at the beginning of the section in which they are found

Section 1: The Insurance Agency

The Insurance Agency

1. Explain the different factors that affect how an agency distributes its products and provides customer service

2. Differentiate between an agent and a broker

3. Explain the standard of care an agent owes to its insurance companies

4. Explain the standard of care an agent owes to its customers

5. Identify the potential stakeholders of the insurance agency

• The Primary Function of An Insurance Agency is to Sell Insurance Coverage and Provide Other Fee-Based Services

• Primarily A Sales Oriented Business

• But Service Driven as Well


• Distribution is Affected By:– Number of Employees

– Single or Multiple Locations

– Local, Regional or National or International Operations

– Area(s) of Specialization (if any)

– Agency Management System(s) Used

– Use of Service Centers

LO


• Sources of Income/Revenue– Commission

• New and Renewal• Personal Lines, Commercial Lines, Life,

Health & Disability, Employee Benefits

– Fee-Based Services

– Profit Sharing Bonuses

– Investment Income


• Overview of Positions Within the Agency

– Producer/Agent

– Broker

– Customer Service Representative

– Other


• Positions Within the Agency– Producer/Agent

• Required to have a license, issued by the department of insurance, which authorizes the agent to transact insurance

• Identifying prospects, making sales calls, presenting solutions, securing the buying decision, collecting premium, and binding of coverage

LO


– Producer/Agent

• Acts on behalf of the insurance company

• What the agent knows, the company knows

LO


• Positions Within the Agency– Broker

• Required to have a broker’s license issued by the department of insurance

• Many of the responsibilities are identical to those of an agent except a broker does not usually have binding authority

• A broker acts on behalf of the

buyer/customer

LO


• Positions Within the Agency– CSR

• Customer Service Agent (CSA), Account Representative, Account Executive or Account Manager

• Responsible for providing information,

advice, and service to customers during and after the insurance transaction

• Responsible for the day-to-day operation of an agency


– CSR• Responsibilities may also include sales

such as cross-selling and account rounding

• May be required to be licensed as an

agent (or producer) as duties frequently fall under “transacting” insurance

• Size of the agency will dictate level of responsibility and specialization


• Positions Within the Agency– Other

• Accounting

• Administration/Management

• Claims

• Loss control

• Risk management


Licensing Requirements

• Agent/Producer

– Resident• License to transact insurance in the

state where the agent resides

– Non-resident• License to transact insurance in a

state or jurisdiction in addition to the one in which the agent lives

Licensing Requirements

• Agent/Producer

– Prelicense Education• Education that must be completed

before a person can take the agent’s examination

– Continuing Education• Education that must be completed in

order to renew an agent’s license

• Standard of Care Owed To Insurance

Companies

– Loyalty

– Good Faith

– Reasonable Care

– Contractual Duties

LO


• Standard of Care Owed To Customers

– Adequate Coverage

– Proper Coverage

– Coverage Placed in Their Best Interest

– Prompt Communication

– Coverage Placed With a Financially

Sound Insurance Company

LO


Resources

• The National Alliance• IRMI• Insurance Journal• Agent and Broker• Rough Notes• National Underwriter Company• National Association of Ins. Commissioners• National Association of Insurance Women

KnowledgeIs

Power

Stakeholder

People who have the potential to be affected

by any action taken by an organization.

Any group or individual who is affected by

achievement of a firm's objectives

Stakeholders

• Agency Owners

• Board of Directors

• Managers and Employees

• Customers

• Insurers

• Vendors

• Government

• Industry Associations

LO

Section 2: The Insurance Marketplace

Learning Objectives

1. Explain the regulation of insurance companies

2. Explain the differences between admitted and non-admitted insurance companies

3. Explain the characteristics of an excess and surplus lines agent/broker

Learning Objectives

4. Explain the importance of the financial status of a company

5. Explain the differences between treaty and facultative reinsurance and the importance of reinsurance to the agency

6. Identify and describe the other markets including Lloyd’s of London, excess and surplus lines, and government programs/pools

The Insurance Marketplace

• Insurance Companies

– Regulated at state level by Insurance Commissioner, Director of Insurance, etc.

– The primary purpose of regulation is to protect the consumer

LO


• How Insurance Companies Are Formed

– Stock company• Owned by the stockholders• Objective is profit for the stockholders

– Mutual Company• Owned by the policyholders• Goal is to provide insurance at or near

the actual cost of doing business


• Admitted

– Authorized and licensed to do business in

the state

LO


• Non-admitted

– Accessed through excess or surplus lines broker

– Coverage cannot be placed with a non-admitted carrier unless a due diligence effort has been made to place coverage in an admitted market

– Not protected by the Guaranty Fund

LO


• Non-admitted is not business as usual

– Binding authority

– Minimum premium

– Minimum earned premium

– One-way audits

– Non-standard forms

LO


• Excess & Surplus Lines Agent/Broker

– Places coverage with non-admitted insurer on behalf of the agent

– Appointed by non-admitted insurer to• Solicit sales from agencies• Write insurance• Collect premium• Collect surplus premium taxes

LO


• Excess & Surplus Lines Agent/Broker

– Monitors the financial condition of the insurance company (Insurance Departments have that responsibility for admitted companies)

– Does not usually have binding authority

LO


• Regional or National

– Where does the insurance company do

business?

– Are they familiar with the issues specific to your geographic area?


• Financial Rating– Important to monitor so that the

consumer is not negatively affected by the company’s inability to meet its financial obligations such as paying claims and returning unearned premiums

– Financial data is filed with the state insurance departments annually

LO


• Financial Rating

– Rating organizations can also provide financial information about an insurance company

– Resources• A.M. Best• Dun & Bradstreet• Standard & Poors• NAIC

LO


• Reinsurance Company

– The insurance company’s “insurance company”

Reinsurance

A process involving the transfer of risk from one insurer to

another insurer

LO



– Treaty Reinsurance

• The ceding company agrees to cede certain classes of business to the reinsurer as described in the treaty

• The reinsurer agrees to accept ALL business qualifying under the treaty

LO

Treaty Reinsurance Example

• ABC Insurance Company has a treaty with XYZ Reinsurance Company

• According to their treaty, ABC is required to “cede” to XYZ (reinsure) liability limits over and above $1,000,000 on every personal auto policy ABC writes. ABC pays a portion of the premium to XYZ for this transfer of risk.



– Facultative Reinsurance

• Each exposure that the ceding company wants to reinsure is offered to the reinsurer on an individual basis

• It is individually underwritten and individually priced

LO

• Importance of Reinsurance to the Agency

– The treaty an insurance company has with its reinsurer is a factor that must be considered when an underwriter is evaluating a risk for acceptance and pricing.

LO



– Personal lines can be affected by the limitations (coverage limits, values in unprotected locations, etc.) as the insurance company may be unable to provide coverage because reinsurance would not be in place. Reinsurance may be the reason for the limitation of binding authority.

LO




– Commercial lines can be affected by both coverage limitations and pricing. If reinsurance is required on a risk that falls outside of the scope of the treaty, pricing and coverage availability can be affected. The underwriter must include a premium charge for the reinsurance.

LO


• Lloyd’s of London

– Market for difficult to insure risks as well as unique or unusual risks

– How it works

LO


• Managing General Agent (MGA)

– Wholesale intermediary

– Represents one or more insurers

– Accepts business on behalf of his/her principal within mutually agreed guidelines

– Authority to appoint retail agents within a specific geographic area

LO

Managing General Agent

Agencies

Insureds

Insurer A

Insurer BInsurer C


• Government Ins. Programs/Pools

– Private sector may avoid writing risks that fall outside of their underwriting criteria or are catastrophic in nature

– In response, the government may establish insurance programs or pools as a way to make insurance available

LO


—Caution—

Agents do not typically have binding authority for Government Insurance

Programs and Pools

Important to understand underwriting criteria, binding authority (if any), and problems associated with incomplete

or incorrect applications


• Auto Assigned Risk

• Fair Access to Ins.Requirements (FAIR)

• Wind & Hail Pools

• National Flood Insurance Program

• Workers’ Compensation Assigned Risk

• Federal Crop Insurance (FCIC)

LO

Section 3: Basics of Risk Management

Learning Objectives

1. Identify and explain the five steps in the risk management process

2. Identify and describe the four major classes of exposure

3. Identify and describe the methods used to identify exposure to loss

4. Given a specific situation, determine the risk control technique to apply

Risk Management

The purpose of risk management is to protect the

customer’s assets through the identification

and analysis of exposures, controlling the exposures,

financing of losses with internal and/or external funds,

and the implementation and monitoring of the risk management

process.

Risk Management

5-Steps

• Risk Identification• Risk Analysis• Risk Control• Risk Finance• Risk Administration

LO

Risk Management

The most important step is identification because an

unknown exposure is unable to be analyzed, controlled or financed.

Risk Management

Major Classes of Exposure to Loss

• Property– Buildings, homes, personal property,

business property, equipment, intellectual property, etc.

LO

Risk Management


• Liability– Bodily injury, property damage,

personal injury, hold harmless agreements, etc.

LO

Risk Management


• Loss of Income/Loss of Use– Loss of use from dependent properties,

extra expense, loss of rental value, additional living expenses, etc.

LO

Risk Management


• Human Exposure– Disability, long-term care, life insurance,

key person, employee benefits, employment practices, etc.

LO

Risk Management: Identification

• Interview• Checklist, Survey or Questionnaire• Physical Inspection• Activity Analysis• Advertising/Website• Document Review• Other

– Flowchart– Loss History– Financial Statements

LO

Risk Management: Analysis

• Measuring Exposure to Loss

• Frequency– How often

• Severity– How much?

• Points to Remember

Risk Management: Control

• Avoidance– Don’t own certain property or

engage in an activity

• Loss Prevention– Reduces frequency

• Loss Reduction– Reduces severity

LO

Risk Management: Control

• Duplication/Separation– Reduces severity

• Combination– Using more than one risk control

technique

LO

Risk Management: Finance

Retention

Or

Transfer

Risk Management: Finance

• Active Retention– Customer knows

• Passive Retention– Customer doesn’t know until after the loss

• Insurance Transfer

• Non-insurance Transfer– Contractual such as hold harmless

Risk Management: Administration

• Monitor

• Make Changes When Needed

POD

Section 4: Communication Skills

Learning Objectives

1. Identify and explain the three communication skill areas: Listening, Oral and Written

2. Identify and explain the 3-step process in proofing written communication

• Critical component of agency-customer relationship

• Methods– Face-to-face– Telephone– Written correspondence

Communication Skills


• Two-way communication is the most effective way to get your message across

LO

MessageRe-delivered

Message Spoken

MessageReceived

InterpretationResponse

Clarification

Two-Way Communication


• Verbal vs. Non-verbal– Face-to-Face

• 55 percent of what the listener “hears” is determined by the speaker’s body language

• 38 percent from tone of voice

• 7 percent from words actually spoken

LO


• Verbal vs. Non-verbal– Telephone Communication

• 86 percent of what the listener “hears” is determined by the speaker’s tone of voice

• 14 percent from words actually spoken

LO


• Non-Verbal

– Proximity

– Eye Contact

– Facial Expressions

– Physical Contact

– Smell

LO


• Verbal

– Volume of Speech

– Pleasant Voice

– Avoid Industry “Jargon”

LO


• Written

– Use standardized letters or memos

LO


• Proofing

– Content

– Grammar

– Appearance

• Email

LO


• Proofing: Content

– Information accurate?– Message clear?– Avoided “jargon”?– Organized?– Written to reader’s level?– Reader know what is expected?– Does reader know when information is needed?– Avoided language that could create an E & O

exposure?– Disclaimer

LO


• Proofing: Grammar

– Spell check should not be the only tool

– Look at punctuation

– Other grammar issues• Subject-verb agreement• Possessive nouns

LO


• Proofing: Appearance

– How does it look?

– Is it spaced correctly?

– Are the margins correct for the length of the message?

– Is the font professional in appearance and easy to read?

LO


• Email

– Formal communication

– Discovered in court of law

– Maintain professional appearance

– Disclaimers

– Out of office message

– Message of no binding

LO

Section 5: Basics of Financial Statement Analysis

Learning Objectives

1. Explain the use of financial statements as a part of the underwriting process

2. Explain the purpose and components of a balance sheet and a profit & loss statement

Basics of Financial Statement Analysis

• The financial condition of an insured is an important piece of the underwriting process

– Direct relationship between financial condition and loss experience

– Automation makes it easier for customers to provide financials

– Confidentiality important

LO

• Basic Tools

– Balance Sheet

– Income and Expense Statement

– Direct Bill, Account Current or Premium Finance


LO

• Balance Sheet– Assets

• What is Owned

– Liabilities• What is Owed

– Equity• Assets Minus Liabilities


LO

• Balance Sheet

– Statement of financial condition on a given date

– A snapshot of one moment in time


LO

• Income and Expense Statement(Profit and Loss Statement)

– Summarizes financial results over a period of time

– A movie with a beginning, middle and end


LO


– Determines profit or loss

– Shows the revenues

– Shows the expenses incurred to generate the revenues

LO



– Revenues Minus Expenses = Profit or Loss

– Analyze statements for the past 3 to 5 years to identify trends

LO


• Direct Bill, Account Current or Premium Finance Direct Bill

– Direct Bill• Agency may be responsible for

collecting the initial premium

• Insurance company is responsible for sending premium billings to the insured and for sending late notices/notices of cancellation


• Account Current

– Agency is responsible for collecting the premium and forwarding the net premium (gross premium less commission) to the insurance company

– Premiums are held in a fiduciary capacity


• Account Current

– Insurance Company issues a monthly statement

– Net premium is due the company even if the insured has NOT paid the premium to the agency

– Agency has to request the company to cancel the policy if premium is not paid


• Premium Finance

– Finance agreement is submitted to the premium finance company along with the required down payment and any outstanding payments

– Finance agreement allows the premium finance company to request cancellation in the event premiums are not paid by their due date


• Remember . . .

– You don’t sell a policy, you sell coverage

– Premium arrangements should be made at the time coverage is bound

– Options

• Direct Bill• Paid in Full• Premium Finance


Section 6: Personal & Commercial Lines:Due Diligence and Account Management

Learning Objectives

1. Explain the role of underwriting guidelines, including exceptions

2. Explain the guidelines for effective documentation

3. Explain the steps in account servicing for new business and policy services

Personal & Commercial Lines Due Diligence & Account Management

• Know coverage differences among the policies available in your agency

– “Best terms available”

– Differences in perils, special limits, limits of liability, additional coverages, etc.


• Understand underwriting requirements

– Indicator of type of business company interested in writing or not writing

– May not always agree with them, but they are what they are

– Review underwriting guidelines periodically to stay aware of changes

LO



– Know your binding authority

– Majority of new business submitted should meet or exceed the underwriting guidelines

LO



– Some underwriting guidelines are non-negotiable

– Underwriting exceptions

– Know the company’s appetite and additional services available

LO

• Credit Scoring

– Credit scoring is widely used as part of the underwriting process.

– Each state can individually regulate the use of credit scoring

– It is important for insurance professionals to understand and follow their state’s laws or rules regulating this issue.

Personal & Commercial LinesDue Diligence & Account Management


• Application to Policy

– Application should be completed thoroughly, accurately and honestly

• Correct person(s) or entity as named insured

• Underwriting questions asked of and answered by the named insured

Personal Due Diligence & Account Management

LO



– Could be a problem with coverage if information on the application is found to have been incorrect

– Have named insured sign the application even if a signature is not required

– Application may be completed by the producer and/or the CSR

LO



– Agency should never sign for an insured

– Make sure the application is completely filled out including marking boxes that trigger coverage

LO


• Additional Information

– Loss runs– Supplemental applications– Financials– Photos– Copies of advertising/website– Driver’s list– Narrative

LO



– Document customer’s records with regard to any rejection of coverage, selection of reduced limits, etc.

– Documentation

LO

Guidelines for Effective Documentation:

Made in the agency management system according to the agency’s policies and procedures

More effective to use a “free form note screen” format rather than input areas that require exact information

LO

Guidelines for Effective Documentation:

Made immediately after the event creating the need for documentation has taken place

Should consist of “just the facts”; free of editorial or emotional comments

Documentation can be “discovered” in an errors and omissions lawsuit

LO



– Issue necessary binders, certificates of insurance, evidence of property insurance, identification cards, receipt, etc.

LO



– Upload the application within the required time frame

– Set a follow up for the issuance of the policy

LO



– When the policy is issued, verify that it was issued correctly

– The time to discover an error is before a loss occurs!

LO


• Account Servicing: Changes

– Verify the person requesting the change is the named insured

– Ask the insured for all of the information necessary to make the change

– Verify the insurable interest of the property being added

LO



– Advise the insured when they will receive verification of the change from the insurance company

LO

Personal & Commercial Lines Due Diligence & Account Management• Account Servicing: Changes

– Request endorsement from the insurance company

– Make changes to the customer’s policy information in the agency management system

– Use the contact to cross-sell or account develop!

LO



– Document customer’s records

– Mail policy change confirmation to insured

– Set a follow up for the endorsement to be processed

– Verify endorsement was issued correctly

Claims Servicing Covered Later

LO


• Renewals

– Generate renewal list 90 to 120 days prior to renewal

– Meet with producer to discuss the account and determine who will get updated information

– Areas to update information


• Renewals

– Discuss with insured any changes or new coverages available

– Complete renewal application and submit to company

Section 7: Other Account Servicing Issues

Learning Objectives

1. Explain the differences between a Certificate of Insurance, an Evidence of Property Insurance form, and a Binder

2. Explain the importance of inspections and recommendations

3. Explain how a service center works

Other Account Servicing Issues• Certificate of Insurance

– Informational purposes only

– Not a contract or legal document and it does not give any right to the certificate holder

– Does not amend, extend or change the policy

– Forward certificate to insurance company

LO

Other Account Servicing Issues

• Evidence of Property Insurance

– Evidence that insurance is in force

– Issued for information purposes only

– Not a contract or legal document and does not give any rights to the certificate holder

– Does not amend, extend or change the policy

LO


• Binder

– Temporary insurance contract

– Issued when coverage is bound and the agency either has binding authority or received permission from the insurance company to bind coverage

– Issued by person authorized in the agency

LO


• Binder

– Use policy language and terminology

– Must comply with state laws regarding content of the binder

LO


• Binder

– ACORD is the standard form; language should not be amended without the approval of the insurance company

– Reverse side of the binder contains important language and should be included with every binder issued

LO


• Binder

– Forward copy of the binder to the insurance company

– Follow up to make sure coverage was either replaced by a policy or notification was sent to the insured advising that all coverage was no longer in force

LO


• Cancellation Request/Lost Policy Release

– Obtain the right signature

– Include the time the cancellation is to be effective


• Additional insured and additional named insured requests

– Determine the interest of the individual or entity being added

– Make sure the named insured understands how this could affect coverage in the event of a claim


• Inspection and Compliance Required

– Purpose is to identify hazards, verify operations, establish property values, determine fire and life safety protection, etc.

– Insurance companies may use staff or outsource

LO


• Inspection and Compliance Required

– In some instances, coverage may not be bound until inspection has been made and it is found to meet underwriting approval

– Suggested: insured’s discretion

– Mandatory: must be satisfied

LO


• Proposals

– Professionally written format

– Summarize the coverage using policy language with disclaimer

– Include information about the agency

– More than a premium quote


• Lack of a Market– Due diligence effort

– Don’t promise that coverage can be placed

– Don’t “down play” the seriousness of a non-renewal or cancellation

Diligence: Continual effort to accomplish something


• Lack of a Market

– If coverage cannot be found in an admitted market, the non-admitted market may be used

– If coverage cannot be found, customers should have enough notice as to allow them to locate coverage elsewhere


• Using Service Centers

– Used to transfer the servicing to the insurance company’s service center

– Typically personal lines and small commercial

– Agency’s goal is to remove servicing responsibilities to allow time for sales or to reduce personnel

LO



– Send customers a letter which includes the toll free number and the benefits they should expect

– Inquiries falling outside of the scope of services to be provided are forwarded to the agency

– Contract should outline scope of services

LO



– Procedures should be in place as to notification of new sales, claims, etc.

– Retention should be monitored

– Maintain central log

LO

Section 8: Claims Processing

Learning Objectives

1. Explain the steps in claims processing

2. Explain the purpose of a Claims Log

Claims Processing

• Insured Reports the Claim– Complete ACORD form

– Be sensitive to privacy issues

– Record accurate information• “Just the Facts”

LO

Claims Processing

• Insured Reports the Claim– Do not leave any section blank

• “N/A” vs. “None”

– Understand that most people have not experienced a loss previously and are unfamiliar with the claims process

LO

Claims Processing

• Insured Reports the Claim– Do not indicate whether the loss is

covered or not covered

– Advise customers of their responsibilities (PINES)

– Let the customers know what to expect next

LO

Claims Processing

• Insured Reports the Claim– Send the customer a claims

acknowledgement letter

– Notify producer, supervisor, management, etc., of large losses, questionable losses or losses with coverage in question

LO

Claims Processing

• Report the Claim to the Company

– Immediately report the claim

– Policy conditions typically require the insured to promptly report the loss

LO

Claims Processing

• Report the Claim to the Company

– Failure of the agency to report the loss could create an errors and omissions exposure

– Unfair Claim Practices statutes or regulations may require the agency to report all losses even if the insured does not want it reported

LO

Claims Processing

• Direct Reporting

– Insured reports the claim to the insurance company

– When is the agency notified of the loss?

LO

Claims Processing

• Claims Log

– Maintain on agency management system

– Use it to provide:• Claims count• Number of open claims• Time between first notice and closure

LO

Claims Processing

• Claims Log

– Review regularly to identify loss trends or loss ratio issues

– Compare to insurance company’s loss ratio reports for accuracy

LO

Claims Processing

• Other Claims Issues– When the claimant reports the claim– Privacy issues– Confidentiality– Reservation of rights letter– Suit and Summons – Claims survey

Section 9: Professional Responsibilities:Ethical and Legal Behavior

Learning Objectives

1. Identify the four benefits of ethical behavior

2. Explain the difference between statutes, oral and written agreements, and peer standards

3. Explain the differences between actual, implied and apparent authority

4. Explain the common causes of claims made against agents by insureds and insurance companies

Professional Responsibilities:Ethical and Legal Behavior

Ethics . . .

A discipline dealing with good and evil and with moral duty;

moral principles or practice

A set of rules, based on a set of principles or values that we accept

as truths and that govern our behavior

• Why Be Ethical?

– Social Responsibility

– Avoid of Public Criticism

– Avoid Government Regulation

– Enhance Your Credibility With Customers and Companies


LO

“Excuses” for Unethical Behavior

• “Everyone is unethical at one time or another; therefore, it is no big deal. Everybody does it.”

• “Nothing too serious will happen if I get caught.”

• “I will do what I have to do to make the sale.”

“Excuses” for Unethical Behavior

• “If I don’t get the policy written, my bonus is out the door.”

• “It’s not really hurting anyone.”

• “I’ll change it/fix it later.”

• “I thought it was okay to do.”

Training Issue

Vehicle Usage Protection Class

Property Values

Other Residents in the Household

Young Drivers in the Household

Rate Basis, Classification or Garaging Address

Signing for an Insured

Incorrect Rating = Unprofitable Business

Risk is intentionally misrated in order to write the coverage.

Insurer does not receive the

written premium for the exposure

on which the rates were

predicated.

Therefore, insurer does not receive the earned premium for

the exposure necessary to pay for

the losses it predicted would

occur.

Resulting in Unprofitability/Poor Loss Ratio

Questions to Ask

• How would I feel if the facts surrounding my conduct or decision appeared on the front of the local newspaper?

• How would I feel if I had to explain my actions to my friends and family?

• How would I feel if someone took the same action with a member of my family?

• Will I be able to look myself in the mirror tomorrow morning?

• Is it legal?

• Legal Duties Are Based On:

– Peer Standards

– Oral or Written Agreements

– Statutes

LO


• Act Within Your Authority

– Actual or Expressed

– Implied

– Apparent

LO


• Actual or Expressed

– Actual authority is expressly given by the insurance company as found in the agency contract or agreement

LO


• Implied

– Must first have Actual or Expressed authority

– Principal (insurance company) has allowed the agent to have the appearance of authority;

– Authority through estoppel; or

– Authority through custom and usage

LO


• Apparent

– Customer believes the agent has the authority

– Protects the insured from unauthorized acts of the agent

– Such acts may bind the insurance company; however, it may subrogate against the agent

LO


• Errors and Omissions Claims

• Agents Can Be Sued By Insureds and Insurance Companies


Professional Responsibilities:Ethical and Legal Behavior• Common Causes of Claims

Made Against Agents By Insureds

– Failure to obtain proper coverage

– Failure to place coverage after agreeing to it

– Failure to give proper advice

– Failure to advise insured promptly of rejection or lack of coverage

LO



– Failure to renew coverage

– Failure to service policies

– Failure to place on best terms available

– Misrepresentation

LO



– Placing with an insolvent insurer or unauthorized insurer

– Modification of established service to customers

– Making a clerical error

LO

Professional Responsibilities:Ethical and Legal Behavior• Common Causes of Claims Made

Against Agents By Companies

– Exceeding binding authority and/or underwriting authority

– Failure to notify carrier of material change in risk

– Misrepresenting the risk

– Delay in forwarding loss information

LO

Contributors to E & O Claims

Contributors to E & O Claims

Lack of Product Knowledge

Lack of Consistent Procedures

Lack of Documentation

• Agency Defense Activities

– Don’t wait before preparing

– Report the claim to your E & O Carrier

– Assign one person to act as claims coordinator



– Hold a staff meeting including all involved agency personnel

• Discuss the situation in general

• Have each person briefly describe their involvement and in writing



– Coordinator gathers all pertinent information into a master file and prepares a chronological written narrative

– Remind all to maintain confidentiality



– Prepare to be a good witness

– Do not change any operating procedures afterwards without approval of your E & O Carrier

– Let the agency staff know the results


Questions . . .

Agency Operations

agency operations

Documents

insurance coverage

insurance companywhat

insurance companiesexplain

account representative

account executive

account managerresponsible

account roundingmay

sales calls