06 Dec Multiple Quotes – Which Ones Are You Presenting
When going to market for a particular line of business, it is common for an agency to get multiple quotes. Based on feedback from the various agencies I am honored to work with, the premiums on those quotes can often vary drastically. So, with that scenario and assuming that the policy coverage (including endorsements) is fairly similar, many agencies would probably choose only to present the “cheaper” quotes. Not too much of an argument from me on that. Obviously, providing the coverage is very similar.
But what if there is the distinct possibility that the coverage could vary significantly? Are you still only going to present the “cheaper” quotes? Taking this path could have a very negative impact, especially if an uncovered claim occurs.
Let’s take the following example using various Management Liability coverages (Cyber, D&O, E&O, EPL, etc.). This example is a real-life example based on a discussion during one of the annual reviews. The agency goes to market for Cyber coverage and gets multiple quotes for a client. They get two quotes: one for $5,000 and the other for $12,000. That’s quite a difference in the premium. Based on that significant premium disparity, they only present the $5,000 quote, probably assuming they would not stand a chance of getting the order on the $12,000 quote. So far, a Cyber loss has not occurred but let’s take the position that the client suffers a Cyber loss only for that loss not to be covered due to policy language. Because the client suffers an uninsured loss (a common fact pattern that generates E&O claims), they decide to bring litigation against the agency. During the discovery of the E&O matter, the client found out that the agency secured a quote that would have covered the now “uninsured” loss.
What is the agency’s defense going to be? Possibly, the agency would take the position that you thought there was no way the client would have paid that much more. On this “hypothetical” E&O claim, guess what the outcome probably would be. I will tell you – you will probably lose! The client will emphatically state that they would have been more than willing to pay the $12,000 since the coverage was much broader. After a loss, the client will ALWAYS say they would have purchased the coverage even though it was more money.
So, bottom line, what is one thing the agent should not have done? They decided for the client and presumed the client would want to avoid paying the higher premium. Please provide the client with the options/proposals you secured in the marketplace and with many lines of coverage (especially Management Liability), including the specimen form. This enables the client to make a more informed decision. I often refer to this during my review discussion as Client Accountability. At the end of the day, the client decides what they want and don’t want. It also significantly reduces your E&O exposure, which is a very good thing to accomplish.