Part 2: Best Practices for Reducing Your E&O Exposure


Watch for life changes: You need to be alert for changes in your insureds life circumstances and educate them about communicating life changes to you. That means account reviews and periodic communications, both outgoing and incoming. It also calls for a systematic, organized, detailed way to track and process endorsements, including a paper trail.  Why? Failure to alert or explain coverage options to an insured is one of the biggest reasons for an Errors & Omissions claim and potential lawsuit.  

Here are some common events that should prompt a coverage discussion:

  • Marriage or divorce
  • Birth or adoption of a child
  • Death of an immediate family member
  • Purchasing a new home, condo, a second home, downsizing, or moving to a new apartment or a new city/town/state
  • Home renovations or adding buildings to your property
  • Renting out your home
  • Getting a new car
  • A teen child getting an auto license or going to a remote college
  • Joining a carpool
  • Acquiring expensive electronics, antiques, jewelry, furs, or specialty collections
  • Acquiring a recreational vehicle – RV, motorcycle, snowmobile, or utility trailer
  • Getting a boat or watercraft
  • Getting a recreational drone
  • Changing jobs and job benefits
  • Retiring
  • Starting a home business or a small business
  • Joining the sharing economy, such as renting property or driving for Uber
  • Military deployment

Communicate and educate clients on an ongoing basis through various communication media: The most important step that you can take to reduce your exposure to E&O claims is  to stay in frequent communication with your insureds and to provide educational content.  Teach your clients to think about calling you to re-assess insurance coverage when any major life changes occur. Provide scripts to your service staff on eliciting such information conversationally. Issue periodic email reminders to home and auto insureds with tips and reminders. Follow your clients on social media and get them to follow you. Post periodic reminders about life events that should trigger a  call to change coverage and seasonal insurance-related tips.

Communicate with a service ethic and sales will follow.  All too often, service people shy away from selling or having discussions that seem sales related.  Providing information that will reduce your clients risks is one of the key services that you provide. You are the expert that understand risks and exposures, that is one of the primary reasons clients are seeking your help rather than buying directly online. Explaining and quoting coverage options is a service. Discuss the pros and cons and leave the decision to them. Your clients will appreciate it.

Process policy change requests as soon as possible. Whether via an incoming request or an outgoing call that elicits the need, act as expeditiously as you can. This requires a process. Whenever possible, process that change or request in real time while the client is on the phone. If you are waiting for a client decision or a quote, set deadlines and expectations for follow-up.  Make notes in your agency management system and set reminders and alerts. If the change involves a change in premium, alert your client to this via text or email to keep a paper trail.

Communication is a two-way process. It’s not just whether you convey a message, it’s whether the message was received and understood.  Insurance is confusing to people who do not work with it every day.  Avoid lingo, jargon, and acronyms. Don’t assume understanding, probe.  Make it easy for people to ask questions.  This is as true for commercial insurance as personal insurance. It’s easy to assume that a company principal or CFO knows details about insurance.  While that is sometimes true, it is not a given.

Document, document, document.  There is no such thing as too much documentation. The one-to-one personal interaction of phone and in-person conversations is great, but it is essential to follow up in writing with a summary of key points so that you have a documented process. Don’t rely on memory. Note all client interactions and decisions in your client log.

Don’t step in the insurer’s shoes. When a client is filing a claim or inquiring about specific coverage related to a claim, be careful about getting between your client and their insurer and interpreting whether they’ll be covered.  Stay factual, provide support, but not opinions. Let the insurer determine coverage. Never discourage them from submitting a claim.

If an E&O claim occurs …  Despite your best intentions, bad things can happen to good people. If you learn of an E&O claim, real or potential, be professional and don’t argue with the client, admit fault, or try to make it go away. Whether it is an actual claim or just a potential one, notify your E&O insurer immediately. Be prepared to provide background information and thorough documentation. Get guidance from your E&O insurer or your attorney.  Next, stop talking about the claim – to the client, to the insurance carrier of the coverage, to anyone beyond the need-to-know circle. You know how smart people on TV news, legal dramas, and films respond to seemingly simple questions with a reply like, “because this is under litigation, I am not free to discuss?” That. Work with your attorney or E&O carrier to develop an appropriate response along those lines.  Don’t exacerbate a problem via talk.

Why Are Insurance Endorsement Checklists so Important?

It is of vital importance that you help your client understand common gaps and exposures in their personal coverage and offer them potential solutions. They may weigh the risk/value and decide against it but as an agent, you have fulfilled your duty to advise them. Checklists provide a process to ensure that you run through potential gaps in coverage that could leave a client exposed. They also provide a documented paper trail that tracks the discussion and the subsequent client decision, offering a ready defense, should one be required

How Personal Lines Endorsement Checklists Can Reduce Your E&O Exposure

Decrease your exposure to E&O claims and increase your client satisfaction by investing in a plan to give your team a structure to reduce errors and boost the customer experience. We recommend that your agency invest in getting detailed forms together for everyone to follow to help reduce your E&O exposure and help your team drive customer experience.

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