If you’ve been in business more than a year or two you know people file lawsuits over the darndest things. They don’t usually win but that doesn’t stop some folks from trying, and you still spend time and money defending your business and professional reputation.
Among insurance agents, General Liability and Property and Casualty professionals typically see more Errors and Omissions claims. But Life and Health Agents face similar risks, and the top sources of professional liability complaints are the same across practice areas.
The top sources of E&O complaints fall under three categories: communication, documentation and expectation. Let’s briefly review each of them.
Communication: Never Assume What Your Client Wants
Likewise, never assume what your client knows. Common allegations include not explaining policy exclusions or limitations; not getting adequate coverage or coverage at all; not communicating renewal information; not notifying client of policy cancellation; and not alerting client to late payments if you’ve done so in the past and a claim occurs after cancellation are just a few.
Without great communication, we couldn’t have put a man on the moon.
You may feel like a robot, or mp3 download with a glitch that repeats, but more communication is always better than less. Explain the products you offer, their benefits and risks. Review any regulations or policy provisions that affect actions your client can take. This is especially true with Life and Health Agents who offer annuities and other investment vehicles.
Documentation: Get Signatures, Get a System
Common claims include not processing applications in a timely manner; denial based on inaccurate or incomplete application and client assumes coverage is in place; failing to document a client’s decline of coverage; purchase of the wrong product; and failing to renew if client understood agent would provide notification of policy expiration in addition to carrier notice all have their roots in documentation.
This is where systems and checklists are ultra-handy in documenting important outcomes of client meetings, phone calls, and emails. Never assume clients agreed or disagreed with anything. Never assume you told a client everything you thought you did. A thorough record trumps memory every time.
Expectation: Past Performance is No Guarantee…
Expectation as a source of E&O claims covers two different types: Expectation of what an agent will do and expectation of how a purchased product will perform. No matter how many times clients hear or read, “Past performance is provided as an illustration only and is no guarantee of future performance,” they’ll be disappointed when reality is less what they imagined. Some will file claims.
Don’t market yourself as an expert if you don’t have credentials to back it up. Don’t go outside your area of expertise. Don’t promise or predict investment performance. With life and health policies, make sure clients understand how renewal works and where notice originates, for renewals as well as payment issues.
Facing E&O claims is part of doing business. Current and former clients can make allegations upon “information and belief” and it doesn’t mean you did anything wrong. But knowing the top sources of professional liability claims helps you manage the risk.
Communications. Documentation. Expectation. C-D-E. If you need a trick to remember them try this:
A: Agents
B: Beware of
C: Communication
D: Documentation
E: Expectation
A-B-C-D-E. Catchy, yes?
If you like reminders, get a notice from us before your existing E&O policy expires.
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