The previous three articles in this series dealt with automation as it pertained to an agency's processing work. This article by Curtis Pearsall will examine how several aspects of automation can help reduce your E&O exposure.
For the nearly 20 years that I've been involved in E&O, the leading cause of claims has been failure to provide the proper coverage. If your agency management system is somewhat current, you already have a powerful tool that can cut your chances of facing an E&O claim. Although this tool has different names I usually refer to it as an “exposure analysis review.” Now, there are no silver bullets that will guarantee that you'll never face an E&O claim; but believe me, this is pretty close.
Some producers provide a proposal based on the client's current coverages, with the hope of competing based on price. Other producers will recommend coverages for exposures that the client or prospect typically faces. As I see it, neither of these approaches is good enough: To do the job properly, you need to do a true exposure analysis review. And you know what's nice? The tool that you need is part of most agency management software.
These systems usually list in detail the potential exposures facing your clients and prospects, usually alphabetically or by SIC code. Whenever your producers meet with prospects, they should use this list to do a systematic review of the various coverages that your companies offer: Property, Liability, Business Interruption, Professional Liability, Directors and Officers, etc., Using the list properly, in addition to being professional, can also help producers round out accounts. It's essential to cover all of the potential exposures, not just discuss those that typically can happen. A big key to avoiding E&O claims is to identify every exposure and to recommend coverage for them.
The next area of automation that can play a key role in reducing the likelihood of an E&O claim involves formal quote presentations. Whether you're dealing with current customers or prospects, you need to give them a proposal that clearly outlines the coverages that you're quoting and the limits associated with those coverages, as well as any exclusions. Many an E&O claim has grown out of a misunderstanding between the agency and the client — and I don't need to tell you who has a better chance of winning those misunderstandings. It's essential that you get your client to acknowledge in writing that they're not buying certain coverages. This will be a powerful defense if a claim occurs down the road. Using this approach should ensure and document that your client understands all coverages, limits, and exclusions.
Last, but far from least, use automation to cross-sell various coverages. For example, for how many clients do you write Auto and Homeowners, but have never offered a Personal Umbrella policy? Automation can help you identify these clients and send letters out advising them of the benefits of Umbrella coverage. This approach offers two benefits. First, you'll probably sell more insurance and second, if they don't buy coverage, the offer will provide a valuable defense against a potential E&O claim.
So, automation in general is a good thing provided that you take advantage of all of the benefits that it offers.