PRIMER ON INSURER/AGENCY RELATIONSHIPS
The following illustrates some of the common practices that many Life/Health carriers follow, why such practices are troublesome to P/C agencies, and the simple steps that each party may take to prevent grief.
CASE G-1: Group Life, death claim
The carrier, a large, well-rated multi-line company licensed in 49 states, had covered one group for six years without a claim. Coverage was for Life only, since Group Medical was placed elsewhere.
One employee's widow completed the claim papers and, in error, indicated that her husband had been a part-time employee. The error was not detected by the employer's personnel staff, who forwarded the form to the carrier. The carrier's claim examiner contacted the employer-not the agent. He wanted payroll records and other data to support everyone's statements that the late employee was in fact full-time, since part-time employees were not covered by the plan.
The employer's president wrote a firm, succinct letter to the carrier:
'A.B. was employed here for 30 years, all of them full-time. He was our vice-president. He had no other job. His widow, under stress, made a simple mistake in completing the form, and we did not catch it. This is a relatively small claim which should not be delayed any longer. Kindly process it without further delay.'
The letter didn't work. Each side-carrier vs. employer-became adamant. The carrier demanded payroll records, and the president refused to display them.
When the agent spoke to the carrier's claims handler, the conversation went like this:
Agent: Strictly speaking, of course, you have the right to go to payroll records, but understand the client's view. Three years ago, you changed your computer software and totally messed up his records, costing the accounting and personnel staffs a lot of time and grief. He wanted to drop you-after all, you provide Life-only and you have lots of competitors-but I advised him to stick it out with you. He was loyal to you. You have ample verification that A.B. was full-time. Why make a mountain out of a molehill?'
Company: Well, as we told him in our letter, we are . . .
Agent (interrupting): What letter? I never received a copy of a letter from you.
Company: Of course not. We never send copies of correspondence to agents because we deal directly with the insureds. In these matters, it's as if you don't exist. No need to get you involved. [THE FIRST TRAVESTY]
Agent (seething): I am to get copies of all correspondence. Now let me speak to your senior claims officer.
Agent to claims officer: How dare you adopt a policy of keeping agents in the dark, just when they are needed most, at claim time or even worse, when there's a problem with a claim? You're a multi-line company; you wouldn't pull that with your P/C agents, so how can you do it to anyone else? This is the kind of stuff that balloons into Errors & Omissions (E&O) claims, lost accounts, and all kinds of bad news. Is there any reason that all my accounts cannot be flagged to tell your staff to copy me on all correspondence?
Claims officer: Well, that's not our system. We just don't deal with agents in the claims department. [THE SECOND TRAVESTY]
Agent: That policy is unacceptable to me. I certainly hear from your company when it wants help in collecting premiums. I want to be informed at claim time, or I will hold you responsible for negative fallout, if we do any business at all.
The claim was approved within the hour.
Life/Health/Group carriers must understand that P/C agents must be informed of events involving their insureds, especially at claim time, and particularly if there's a problem. This policy may be 180 degrees different from what Life companies hear from Life-only agents, and that's why a company must be told of your position. Don't wait for a disaster.
Call To Action
One of the criteria for Life insurance companies with which you work must be:
The carrier's departments-all of them-should communicate fully with the agent. Agent is to get copies of all mail sent to insured. (Possible exception: routine premium notices.) Agent is to get prior notice of a rejected claim, rate increase, or any other adverse news. Agent must be at least as informed as insured.
If a Life carrier or brokerage firm cannot agree to this concept, don't do business with it, unless there are overwhelming reasons to work with it otherwise.