SHOULD AGENCIES FOLLOW UP ON COMPANY NOTICES TO INSUREDS?
by the IIABA Virtual University Faculty
A company sends a premium notice to one of your elderly clients who lives alone. You're fearful that they'll forget and not respond promptly. Should you follow up with the insured or a family member? This question also arises with regard to cancellation notice follow-up for similar insureds and important clients. The IIABA faculty examine whether this is good business or bad E&O policy.
“How do you provide for clients who you know are over the age of 80 who live alone and miss their premium notices? Are the notices from the carrier sufficient, or should we exercise an additional attempt to contact the insured or a family member? I'm concerned about liability as the population ages.”
This is a tough question because you need to balance a business decision with an E&O exposure. Any E&O expert will tell you that you're creating a problem when you initiate a procedure for one set of insureds and not for others. This is what our Florida association (based on a statute) calls the “Invariable Practice” Rule: One Way, All the Time, By Everyone.
If you establish a practice of following up on company premium or cancellation notices for the elderly, this policy can be used against you unless you follow it with all other insureds. On the other hand, there's a legitimate service need for this practice in many cases. We ran this issue by our faculty and got these opinions:
FACULTY RESPONSE
I believe that “don't do it” is a little too cut and dried. Because many agencies have elderly clients, perhaps one of the services the agency can provide is to ask the elderly person who else might be responsible (children, siblings, a bank, an accountant, or legal counsel) where notices might be sent. At least consider taking the time to make sure that there's no one else who might look out for this person.
However, if the person wants to remain “independent,” then a periodic reminder in writing to all clients would be in order, letting them know that they're personally responsible for taking action on any notices received direct from their insurance company. This is a good practice for agencies to institute, particularly if they've been in the habit of notifying certain individuals in the past.
FACULTY RESPONSE
I think the HO has that “additional interest” (AI) endorsement you can add if the company is willing. You might add a more responsible family member as the AI, so that they get the notice too. On Auto, perhaps you could add this person as a loss payee, so they would also get a notice. As an agent, I wouldn't want to be responsible for following up with them.
FACULTY RESPONSE
One thing that always comes to mind with this type of service is the “favored client” status. Basically, the courts have held that if you provide services to one insured above the call of duty (such as premium reminders) you must do the same for all insureds. So if you don't notify all clients, an insured who's cancelled could use this against you when contesting a claim after cancellation. Most of the agents I talk to wish they could stop sending the notices, making calls, etc. on cancellation notices, but find it difficult to do so once they've started.
FACULTY RESPONSE
If you do it for one (or a group), you should probably do it for everyone. However, if you make a business decision to do this, develop a specific procedure and put it in your procedures manual, explaining exactly why you're doing it and to what specific class of insureds it applies. You might also include a statement that the agency has no legal obligation to provide notification (it's the company's responsibility), but you're doing it only for the reasons outlined.
FACULTY RESPONSE
Unless you can implement 99.9% accuracy and a consistent electronic system, I wouldn't send any additional notices beyond the company notice. Even if you do, how much time do you get? A 10-day (plus mailing) notice usually makes it to your office with about 7 days to spare. Your notice won't make it to the insured in time to matter (assuming that the insured reads your notice when they didn't read the company notice). If you're in a 30-day state, you have a little more time.
FACULTY RESPONSE
Legally, you step into a possible minefield if you notify some and fail to notify others. That said, to keep the E&O folks happy, what do we do that doesn't risk potential liability? Professionally, I think you owe your clients some handholding here, especially with older clients who are probably depending on you for help.
FACULTY RESPONSE
There's unquestionably a greater E&O exposure by doing this selectively. This is a business decision. You have to decide if providing this service (which is commendable) for a few accounts is worth the Professional Liability exposure.
Do you have an opinion? If you've implemented agency procedures that have been effective in this area, feel free to e-mail your tips to [email protected] .
SUBSCRIBER RESPONSE
We can stop being human. Or, we can sometimes throw caution to the wind and do the right thing.
Maybe those elderly clients have been loyal agency clients for years. Doesn't that count for something? If I value the client's business, I'll do what I can to retain it. If there's no one nearby to notify through Additional Interest endorsements on a policy, this might be the only means of keeping the needed coverage in force.
It comes down to personal choices. Do we do that which is only in our own self-interest? Or, do we do the right thing? I remember an old closing line from my Life insurance days, “Have you ever been sorry for doing the right thing?” I hope I never am.
Jack J. Maniscalco
Jack J. Maniscalco & Son, Ltd.
Washingtonville, NY
Reproduced, with permission, from the VuPoint Newsletter of the IIABA Virtual University. For more information on the Virtual University, click here . The members of the University Faculty offer expertise in every aspect of agency management and marketing. Many of these faculty members are available for in-house training or consulting. For contact information on faculty members, click here .