14 Jul Be Honest – It’s the Only Way
“It takes 20 years to build a reputation and 5 minutes to ruin it. If you think about that, you’ll do things differently” – Warren Buffet
It goes without saying that the relationship between your agency and your carriers is built on trust and honesty. When you provide the carriers/wholesalers with submissions, there is an expectation that those applications accurately reflect the true nature of the risk. When they are not accurate, don’t expect the carrier to be very forgiving.
When the carrier discovers that the risk you submitted is not exactly as it was presented, it is certainly possible for the carrier to allege they would not have written the risk had they known the correct information. The end result could involve the carrier pursuing litigation against the agency. One situation that was brought to my attention involved an agency submitting an application online to a highly–regarded insurance company. The first time the agency submitted the BOP application, the risk was rejected. The producer then modified the app and resubmitted it – again, a rejection. On the 15th time the application was submitted, the agency was finally able to get the risk accepted. That risk then suffered a sizeable property loss, and the carrier discovered the application did not accurately represent the risk. Since the client had no role in the misrepresentation of the risk, the carrier paid the claim and subsequently sued the agency. Guess who won that lawsuit?
As you look to write a specific account, there is the possibility that the risk may not exactly meet the carrier guidelines. The issues might deal with loss history, amount of occupancy, square footage, degree of protection such as sprinklers, or non-renewal history. The list of possibilities is virtually endless. Are you being honest with the carrier, or is there the possibility that you may bend the truth?
What about when the app is completed? If you don’t know the answer to the application, do you guess? You might think that no one would ever know, however, this issue has been the central focus of many E&O claims. More often than not, the agency caught the full brunt of the carrier’s consternation.
Some key take-aways:
- When completing an application, the best practice is to complete it with the customer’s input. Ask all the questions and don’t presume to know the answer to any of them. Upon the completion of the application, require the customer to review it. Then require his or her signature, thereby attesting to the accuracy of the information. Getting a signature even when it is not required can be very powerful!
- When handling follow-up questions from the carrier, don’t presume that you know the answers. It is best to contact the customer to secure the answers. If the customer answers your questions over the phone or in person, document those discussions in the agency file and send a letter or email back to the customer that memorializes the discussion and the responses, and include a copy in your file.
In addition to being honest with your carriers, being honest with your clients is obviously important. When customers ask questions with the goal of better understanding their insurance program, how the producer chooses to answer those questions is extremely important. If you don’t know answer, find out and then get back to the client.
In my early days on the agency side of the business, I accompanied the agency owner on a sales call. During that meeting, my boss (the agency owner) totally misrepresented aircraft coverage. When I approached him about it later, his response was, “They will never know I didn’t know what I was talking about unless they have a claim – and what are the chances of that.” I resigned shortly after.
All agency sales staff should know honesty is the only way, and anything outside of that will not be tolerated. An anonymous quote sums it up best: “I’d rather be honest than impressive.”