18 Feb The One-Offs
Having been in the industry for several years, I have had several opportunities to quote that new and exciting risk I have never quoted before. A challenge, something different, and the doors this may open. We have all been there, especially when you are a new producer trying to build a book of business. Thank goodness my mentor (my father) could put me in my place better than anyone. His famous line was always, “Tell me what you know about it.” When he didn’t think I knew enough, he always gave me two choices: learn the risks and exposures or walk away. He would always bring it home with his other famous statement, “I am not going to go play in the big brick building in a town called to court because you didn’t know the risk.” Several times, I had to sell it twice, first to him and then to the prospect.
So, I learned from the beginning of my career that if I did my due diligence, maybe I wouldn’t need to return to the prospect to ask more questions I should have asked the first time. I know there are always more questions, but if I did my job, certain questions would have been addressed during the discovery process. Considering that new business, whether new clients or existing clients placing new coverage, is the largest driver of E&O claims, agencies focusing on the risk analysis process are taking major steps to reduce their claim potential.
Unfortunately, or fortunately (depending on how you view it), due to the hard market, this has become an issue for more than just new businesses. Several agencies have told me renewals are like writing a new account. With the new hazards and exposures, new policy restrictions, and the need to move the account to a new carrier and do the “Mirror Test,” they sometimes feel they are starting from the beginning. In many ways, they are. The good news is that over the past few years, the majority of the book has been reviewed.
As your reviewers, we remind you during every visit that there are steps to follow that will help in E&O claim prevention. We know that a copy of the current policy is usually the starting point for new business, and prior applications are used on renewals. Still, the exposure analysis is one of the most important steps in the risk management process. The type, size, and complexity of the account will determine the tools used. Remember, the exposure analysis is also an annual responsibility. Accounts change, exposures to loss change, people in charge of purchasing the insurance change, and appetite for exposure and coverages change. Agencies should view the exposure analysis process as a value-added tool that will assist in securing and retaining the account and help educate the client base. Typically, E&O claims are generated when clients suffer a loss that is not covered.
Proposals are not only a means to secure an account; they may also play a role in the event of some form of E&O litigation. Proposals or quotes should be consistent for the agency, help educate the client, contain all pertinent information, and include appropriate disclaimers (wraps), whether agency-generated or carrier-generated.
Purchase decisions and coverage declinations should be confirmed in writing. Mid-term changes — adding or deleting people, places, and things or modifying coverage and limits — should also be verified in writing.
The “Mirror Test” compares the expiring and renewal policies, whether with a new carrier or the same carrier, with changes — new edition dates, endorsements added or removed. Any reductions in coverage must be brought to the client’s attention in writing.
Last but not least, the memorialization of conversations — you have heard it before: “If it is not in the file, it did not happen.”
As we navigate these complexities, we must remember that thorough risk analysis and meticulous documentation are our allies. Comprehensive proposals, clear communication, and documented confirmations of coverage decisions are not mere formalities — they are essential practices that underpin our professional integrity and client trust. Conducting exposure analysis and adhering to the “Mirror Test” for policy renewals fortify our defenses against potential E&O claims.
Striving for excellence in these areas mitigates risks. It enhances our ability to deliver customer-centric solutions, aligning our services with the evolving needs and expectations of putting the customer at the core of decisions and activities. It is a personalized and meaningful experience that aligns with the client’s needs — hopefully providing client satisfaction, which should increase retention and potentially increase sales.
Emerging technologies, such as artificial intelligence, are poised to revolutionize how we conduct exposure analysis and policy comparisons.
Parametric insurance models, which offer predetermined payouts based on specific event magnitudes, are just one example of how we can provide more predictable and transparent solutions.
I still don’t have a crystal ball, and the industry is still challenging. Looking at what the future holds, our mission remains unchanged. I can still hear my father: “Your job is to identify their issues and problems and suggest tailored solutions. The client’s job is to decide what they want to transfer to an insurance contract and what they are willing to self-insure.”