4 Reasons Why Risk Assessment in Insurance is Vital for Agents

Agents need to be experts at risk management in insurance in the current market situation. They must learn risk management in insurance, just like insurance advisors, to get more business & avoid legal action. But why? Read on to find out the importance of learning insurable risk management for agents.

Insurance agents have been a staple in insurance since it’s conception back in 1350 AD. The profession is as old as the industry itself. And like the industry, it has evolved to match the market.

Agents of yesterday would have a more of a broker’s role, taking care of the paperwork for the insureds and acting as the point-of-contact. In recent years, computers have replaced traditional paperwork. However, agents are still numerous and prosperous. It is because the role of an agent is shifting towards an advisory one rather than a sales agent.

Hence, at present, the roles of insurance agents and advisors have merged. Their duties are similar to the point where it wouldn’t be wrong to call insurance agents as insurance advisors. To be a good advisor requires knowledge and experience. Insureds still prefer agents over direct computerized systems because of the advice they offer.

Insurance is Transferring The Insurable Risk

Insurance is the transference of insurable risk from the insureds to the insurers. Accurately, insureds transfer monetary responsibilities of losses to the insurers in exchange for paying a premium.

But how do the insureds identify insurable risks, and which they can afford to bear comfortably?

Simple: through insurance advisors and agents.

While it is ultimately the underwriter that details and specifies the insurable risks, the agent is the one that needs to get all the information. Hence, risk management in insurance is essential for agents because:

1. They need to adapt to the market.

As we mentioned before, the role of the agent is changing. According to Bluefin Professions, carriers selling insurance policies directly to the insureds are forcing agents to adapt . If agents cannot manage such insurable risks accurately, they face several problems. They might face a lack of business since customers would be present at first, but as things start going wrong, they’ll switch.

Customers are more likely to pick and recommend an expert over a novice. They usually look for an agent’s ability to manage the insurable risks accurately and support appropriate coverage.

For example, the cyber liability insurance market. Technology is advancing day by day, and companies are adopting them rapidly. With maximum operations and data storage in the digital platform, companies are always exposed to the threats of cyber-attacks.

Thus, clients would want an agent who is up-to-date and aware of the possible cyber-attacks for a company. They would seek suggestions on whether the policy provides coverage during such attacks or not, before they purchase the policy.

Click here for info graphic

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!

2. They might face legal actions if the insureds file a case.

“Failure to advise” is a common lawsuit that plagues agents today. This is an E&O exposure that is filed by the insureds when the advice they get is not good enough. Although E&O insurance for insurance agents can help them get protection against such claims, its always wise to be precautious beforehand.

Insurance advisors and agents are increasingly facing legal battles which is another reason to learn risk management in insurance. After Hurricane Sandy, people affected by the storm got a rude shock when they realized that the homeowner’s policy does not cover flood damage (this is a popular insurance meme in the niche). It wasn’t funny to them, though.

Homeowners (beachfront property holders in particular) filed numerous lawsuits against the insurance advisors and agents. According to Consumer Reports, 56% of Americans think incorrectly that a standard policy covers flood damage.  These lawsuits increased exponentially after the American Building Supply Corporation vs. Petrocelli Group: the New York court conceded that policyholders don’t always read their policies.

NBC News reports, American General Life and Accident Insurance paid $250 million in a case involving 9.1 million policies. On the other hand, in 2002, Metropolitan Life Insurance Co. paid $157 million for 1.9 million policies. Recklessness by insurance advisors and agents cause these losses.

Before this lawsuit, agents were insulated from these lawsuits if insureds accepted the policies without objection. The court concluded that “receipt and presumed reading of the policy does not bar an action for negligence against the broker.”

Simply being good at risk management in insurance is not enough in this case. Examples like this show why insurance advisors and agents need comprehensive Errors and Omissions Insurance policies to protect themselves. 

Accurate risk management in insurance helps insurance advisors and agents avoid these lawsuits, and E&O policies protect them in the worst-case scenarios.

Click here for info graphic

3. It helps progress your career.

An agent’s job has the potential to be very big. Moreover, agents aspiring to become MGAs (Managing General Agents) need skills for risk management in insurance more than ever.

An MGA is an insurance agent that has been granted underwriting authority by insurers. This means they can sell and bind policies by themselves. Agents need to be exceptional at recognizing and addressing the insurable risks. Else, they are on the danger of more severe lawsuits than insurance advisors and agents usually do.

Moreover, they should also have proper knowledge of the types of insurance frauds which they might be victims of. Familiarity with scams and frauds will save themselves from inevitable mishaps in their career.

Referrals are the holy grail of insurance marketing for agents, and it will only happen once people are confident in the abilities of the agent. Agents need to build trust before people start recommending them, which can only happen if they meet the needs of the customers adequately.

4. Consistent and Efficient Operations

The main idea of risk management in insurance is to discover the risks that would cause daily operations to fail. Identifying those risks that would hamper operations should be an essential task for an agent. Agents need to minimize risks as much as possible, which in turn, results in smooth functioning.

Any improvements in the risks identified, big or small, can lead to efficient operations for both insurance advisors and agents. Resolving risks improves the activities of the insurance advisors and agents, which in turn increases customer satisfaction levels significantly.

To manage this risk, agents need to find solutions to resolve risks or alternative methods.

Insurance agency without risk assessment is a risky business!

As we highlighted above, agents need robust risk management skills. Else, they will lose their business, face lawsuits, and run the risk of having a stagnant career. So, on top of your soft skills and knowledge of insurance, you need risk management skills as well.

Do you agree with us? Let us know 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!

Share This Infographic On Your Site

Pin It on Pinterest

Share This