How can Insurance Agents avoid Errors and Omissions Claims Against Them

Insurance agents often find themselves in a tricky situation. No matter how experienced they are, they do make mistakes here and there. However, as a professional, such blunders come with a heavy price. The cost for insurance agents is Errors and Omissions claims (E&O), and let me tell you, they are not pretty.

Insurance agents are the only bridge of communication between the insurers and the insured. Big exposure to errors and omissions claims. 

 

As professionals, agents are liable for a lot of risks and exposures. Sometimes, the deliverable they provide to their clients may fall short from what they promised. However, sometimes it might be over something as simple as a subrogation claim. 

Errors and omissions exposures for agents cause more than just headaches. Agents have to fight lawsuits for reasons they are not at fault at, or from very tiny careless mistakes. Therefore, agents must also prepare for different types of insurance frauds.  Why lose time and money over something that you can easily avoid?  

Here, I’ll guide you through some common errors and omissions insurance claims and ways on how you and your agency can avoid them. I will also give you secrets that not many agents know of when it comes to keeping these errors and omissions problems aside. Therefore, read until the end, if you want to master the art! 

Providing the right errors and omissions coverage for the right people- that’s where it all begins!

Your client chose you from all the options they had. They have kept their utmost trust in you. Isn’t it your responsibility to provide them the right E&O coverage they need?

Sounds easy, but many agents fail to deliver this right from the start. All the trust your clients have put on you vanishes. 

Is trust the only thing that you lose? Nope. You also lose time and money. 

If your client feels that you’re responsible for the financial loss, they will take legal actions and leave a hefty dent in your pockets.  

The main reason for this is that agents fail to collect all the necessary information from their clients. Hence, they end up advising their clients to get the wrong policy. It is one of the most challenging parts of being a risk advisor.  

Also, sometimes agents may try to sell a policy that does not best suit the prospect’s needs. Such an act is done to increase their sales as much as possible and meet their objectives.

Avoid Errors and Omission Claims

Therefore, to avoid these types of e&o claims, all you need to do is follow these simple tricks:

  • Build your sales processes with due-diligence and honesty. Agents selling a policy should never exaggerate a benefit that the insurance contract does not specify.
  • Have a long session with your clients to fully determine their insurance needs. You want to give them the coverage that fully caters to their needs.
  • Document their needs and have them go through it. Clients often forget what needs they specified to their agents when the coverage fails to go in their favor. Before you close your sales, keep records regarding their needs and make them approve it. It helps you save yourself from future complications.   
  • Make sure you have a reputed insurer backing up their coverage. Continuously monitor your carrier’s financial situation and how well they hold up to their services in the market.

Is fighting a lawsuit inevitable and need guidance for the next step?  

There are a few options available for you when such circumstances arise. Let me remind you that fighting professional liability insurance claims is not pretty. These are times when your diligence pays off or lands you in the mud. Therefore, let us discuss the options that are available to you- 

  • Head to the court and answer the claim against you – Proceed to fight the lawsuit or accept the allegations. Gather all the necessary documents required for filing an errors and omissions claims, which will act as your defense, if required. 
  • Work on attempting to dismiss the claim – If you believe the client has presented weak documents or doesn’t have legal standing to file the claims. Get your lawyer to dismiss the claim.  
  • Settle the claims on your own – The whole scenario is very costly and expensive. Your insurer may advise you to settle the claims out of court as it will be much cheaper. Therefore reducing your court costs. 

Agents fail to provide accurate information to the insurers- a big communication blunder

After assessing a clients risks and needs, it is very important to convey the accurate details to the insurers. This in return shows the dedication you have for your clients and increase efficiency during the claims process. A proven way for an independent insurance agent or an independent insurance brokerage to boost their success. However,  these very aspects could be the reason for their downfall if not done the right way.

Let’s suppose your agency makes lots of daily client calls to collect the required information. If your agency doesn’t record it on paper, there is a high chance you cannot recall that data in the future. 

In the time of providing information about the client to the insurers during a claims process, agents may not have accurate data. Therefore, when you assess your clients’ data based on assumptions, a dispute with an E&O lawsuit is inevitable. 

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What’s the solution? Documentation.

As an agency, you must be clear about all the documents that you need to bind a policy.

Record every single minute information about the client since it will likely influence their behavior. Analyzing their behavior is a must for correct risk identification and assessment.  

Remember, an agent is the only medium between an insurer and the insured. Hence, are usually responsible for any miscommunication between both parties.   

Therefore, you should continuously follow-up with your clients regarding any occurrence or events that are causing them distress.  

Not just clients, you should also maintain contact with the carriers. Stay updated about any policy changes or issues that may confuse the client in the future.  

For instance, your client experienced a loss and needs to file for claims. You’re the first person your client will call in times of need. Guide your clients with care throughout the entire process until they get what they require. If your clients are satisfied with you, there is no question of filing an E&O claim against you. Simple, right? Such practices of taking care of the tedious work processes during an insurance claim, also contributes to increasing customer retention. A report by, the McKinsey shows that a satisfied customer is 80% more likely to renew their current policies than unsatisfied ones.   

And again – always record the communications. Using e-mails to communicate with the parties is recommended.  

However, failing to report accurate information will only harm your reputation in the eyes of both your client and your partnered carriers. Hence, to avoid such E&O exposure, efforts to retain and report consistent and reliable data flow counts!  

Lack of agency expertise in risk and exposure assessment- Root for all E&O Claims

Your agency is already at risk if your agents are not experts at identifying and assessing risks. 

Therefore, lawsuits against your agency for errors and omissions are inevitable if your agents do not correctly counsel your clients.  

Lack of knowledge in risk assessment is often the reason behind their failure to provide a convincing service to the clients.  

Therefore, here are a few things your agency needs to do to prevent such E&O lawsuits: 

  • Take sessions with your team regarding how to develop their skills in risk assessment.
  • Train all your recruits and existing staff regarding your agency’s risk assessment procedures and ask for their participation to make it better
  • Provide all the adequate resources to help your team understand the market better and  bring out the best results for your agency.
  • Put in extra effort to investigate your clients thoroughly. Your advice must resonate with their personal needs and problems.

There’s always E&O insurance for insurance agents and agencies to protect themselves!

Agencies mostly address their client’s needs by identifying their risks and pain points. Just like their clients, agencies also have exposures. Besides ways of avoiding the exposures, agencies should also frequently review coverages.  

E&O insurance for insurance agents can protect your agency from all the claims related to E&O exposures. For instance, professional negligence, mistakes, and failure to deliver promised services.   

When purchasing small businesses insurance for your agency, you need to know about the various E&O costs and coverages in today’s market. For this, Insurance Journal has made it easier by laying out their input on the omissions insurance costs and coverage. 

An agency can also approach individuals who have high knowledge on insurance topics and the insurance industry. Such as accredited advisor in insurance. They can be of a great and provide comprehensive insight on complicated insurance cases.

If all that does not work for you, there is always E&O insurance for insurance agents to cover your expenses. Hence, to sum it up, avoid E&O insurance claims by being diligent in what you do, be an expert in what you’re doing, and document everything!

Did you like what you’ve just read? Let us know how you avoid E&O claims against you in the comments below! 

Learn how you can flourish as an agent after one call!

Schedule a call right now and learn how you can ease your work, sell more, and increase your profits!

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