How Independent Agencies Reduce E&O Exposure

40 Risk Management Steps Independent Agents Implemented to Lower Their Risk

The exclusive 2008 Insurance Journal Agency E&O Survey asked independent agents what risk management steps their agency has implemented to reduce their errors and omissions exposure. Here’s what some of the more than 1,000 agents surveyed had to say:

1. Make sure that if someone declines the coverage that I offer them they have to sign a form indicating they declined the coverage and date. If they have a spouse they must also sign.
2. Doing a better job with putting activities in the agency management system (calls including time, discussion, etc.).
3. Agency forms and checklists that are required for all policies — new and renewal.
4. Developed an agency procedure manual to help maintain processes that adhere to our E&O risk management policies.
5. Extensive upgrade of all electronic files including the scanning of all signed documents related to coverages, elections and/or rejections. Extensive campaign to obtain updated signature documents from all clients related to their coverage choices or rejections.
6. We have stopped writing policies outside our expertise and increased education for our staff.
7. Putting in place formal written procedures for CSRs and producers; Implementing bilingual disclosure/coverage rejection forms for clients to sign; Conducting periodic policies review with clients; Providing training for CSRs and producers.
8. Make sure that the commercial risks are aware of the premium audit procedures.
9. All CSRs to E&O classes. Added an agency management system.
10. Document all phone calls. Voicemail messages are recorded and attached to client file in agency management system. Tightened up procedures as necessary.
11. Recording all inbound and outbound phone calls. Letters to clients regarding status of coverages with certain carriers and their financial condition.
12. Continuous improvements in automation, and education of staff and clients concerning risk management
13. We have changed over to a new agency management system that is better able to handle policy activity, coverage changes, etc.
14. Added client data protection procedures. E&O frequently discussed at staff meetings. Increased facility security.
15. Paperless environment, signatures on everything, all items direct billed or financed. No agency bill items. Inspect everything personally.
16. Documentation for every file — every call — signatures required to remove or lower vital coverages and for declinations of coverages such as EPLI, umbrella, liquor liability, and D&O.
17. We had an outside consultant come in a do and errors and omissions audit. We implemented all the suggestions from this audit into our operation.
18. Sent CSR through E&O course through IIA and established more stringent liability minimums for new business and increasing existing customers at renewal.
19. Invest more than $250,000 annually for compliance compensation, training, checklist revision, outside audits.
20. At least one-third of principals and staff must attend E&O workshops each year. We also changed some office procedures.
21. Better documentation of files. More attached e-mail information kept electronically. More attached PDF files in our agency management system. Closer adherence to best practices. Careful monitoring of additional insured requests.
22. Thoroughly discuss the risk with client. Advise about all available coverages. Client OK in writing. Process endorsements immediately. Follow up for company confirmation. Be sure insured understands coverages.
23. Taken E&O courses, having an E&O audit performed in January ’09, rewriting our agency procedures with service and accuracy in mind.
24. I really scrutinize renewals and drive by the properties to take a look at things myself.
25. We have set procedures and time frames that all employees adhere to. We do periodic audits of file to make sure that these procedures/time frames are being followed.
26. Licensed only employees; Implementation of new policies and procedures; New agency management system.
27. Complete shredding of all files. Lock all other information.
28. Reviewing current policies with insured. Proactive on renewal policies. Be more selective in type of risk/clients to avoid shady clients.
29. Refined agency checklists; More stringent guidelines on wholesalers we use; Closer examination of quotes vs. apps; Refined proposals.
30. We discuss E&O prevention at agency meeting and require all employees to attend classes.
31. Don’t insure contractors that work for developers.
32. Increased focus on primary agent underwriting and written documentation signed by client on uncovered hazards.
33. We take a relatively high deductible and have a policy in place to handle small (under $25,000) disputes between ourselves and our customer. We settle only first party claims, get signed releases, and often have the participation of the insurance company in the settlement.
34. We’ve been doing complete account reviews for all our clients, and we stopped “recommending” and started offering “options.”
35. Random audit of paper files. Changed agency management systems to one that has a better tracking system and obviously other features.
36. We have done the following: Take notes for every communication with insured or insurer; Daily agenda checklist; Reorganized files; Keep more than one record of money transactions.
37. Decreased the number of carriers, checked financial condition of carriers, stricter procedures in office.
38. Sold off small accounts that exposed us but didn’t reward us; Improved our coverage checklists and oversight of same; Tightened up language on proposals and we double check policies against apps and proposals.
39. Claims no longer handled by the agency.
40. Use of automated renewal and client service timelines. Improved communication and team leadership. Improved policy checking.

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