25 Feb Is Everything You Asked for Included?
In the pursuit of soliciting new business opportunities, obviously a key element involves the sending of new business applications to your carriers and wholesalers. The applications will reflect specific coverages (including modifications to endorsements) that you feel will be needed based on the exposure analysis you performed.
Upon receipt of the carrier proposals, probably one of the first areas you look at is the premium. Is it a competitive number and does it enhance your ability to land that prized account? While the premium is obviously important, it should definitely not be the sole extent of your focus. In many cases (some that turned into E&O claims), the premium was extremely attractive for one basic reason, the carrier had not quoted all of the coverages the agency had requested. In one of our recent E&O Plus webinars, an example was provided where the carrier did not include in the proposal the requested business interruption coverages. No wonder the premium was “competitive.”
Bottom line, it is vital to have a procedure that checks the carrier proposal to determine if all the coverages requested were provided. One E&O Plus agency I am honored to work with recently indicated that in checking the carrier proposal on a specific account, there were more than 30 missing requested coverage modifications.
You might think if the carrier can’t provide all the coverages you requested, they will tell you. Although you may hope that happens, it is actually unlikely.
The best place to start is to presume the carrier proposal does not exactly meet the coverages requested on the application. An analysis should be conducted (using a spreadsheet / checklist) carefully reviewing the carrier proposal and comparing it to the application or other documents noting the coverages requested. For many agencies, this falls on the marketing department, but it is not a bad idea to include the producer working on the account (who knows the coverage that is needed to sell the account better than the producer?). There is certainly also the possibility the carrier has added an endorsement that needs to be noted such as a Protective Safeguards endorsement or professional liability exclusion.
If the application was sent to the wholesaler market, the coverage issues could be more significant. The E&S market is known for excluding exposures they are not willing to cover or for placing significant limitations on the coverage.
As missing pieces are identified, this should prompt dialogue with the underwriters to hopefully resolve the issues. This process could take some time, so securing the carrier proposal well in advance of the prospect meeting is key. If the carrier proposal references specific endorsements (some that could greatly impact the coverage), it would be prudent to secure and analyze the appropriate specimen forms.
Performing this comparison is also a key issue when it comes to the development of the agency proposal. If a comparison is not completed, there is greater potential that the agency proposal may reflect coverages that were requested and presumed included. If some of those coverages were, in fact, not included by the carrier, the agency proposal could be incorrect. This could be extremely damaging to the agency if a subsequent problem developed.
To clarify, the responsibility for reviewing the proposal to determine how well it provides what was requested falls squarely on the retail agency. Whether you are dealing with one of your standard carriers or going through a wholesaler makes no difference. The responsibility is on the retailer.
Without question, there is significant potential for a disparity between the carrier proposal and the application. The only true way to uncover the magnitude of the issue is to perform a comparison.