Think Of E&O When You'Re Searching For Markets

THINK OF E&O WHEN YOU'RE SEARCHING FOR MARKETS

by Curtis Pearsall

There's an old saying: If the price sounds too good to be true, it probably is.

As you know, we're in the midst of a soft market in which pricing has come down significantly. Agents face tremendous pressures in retaining their business. Marketing your accounts to your various companies at renewal time is certainly one way to get the best price. However, is this the best approach for the long term?

Obviously, selling based on price has its downsides. If you sell the account based on price, you'll probably lose it some day for the same reason. What's more, selling on price makes an assumption that all companies are the same. You don't have to think long before realizing that this is not true. Each company seems to have its own niche-its own marketing thrust. For some, it's loss control; for some, it's underwriting expertise in a certain specialty market. For others, it's claim service. I remember a number of years ago when I was involved in an accident with a driver insured through another company. Since the claim was clearly not my fault, I was working with the other company to get my car fixed. I was so impressed with the way the other company handled the claim (prompt handling, courteous service) that I wrote to compliment them. If I were not working for Utica, I'd have certainly considered moving my coverage to that company.

Consider Errors & Omissions. Since claims handling is so important (isn't it really what you're paying for?), it's important to factor in the claims-handling expertise of the company. How many years have they been writing this coverage? What counsel do they use? Do they provide any loss-control tips to prevent claims? An important consideration is what will happen if there's a claim in the first year of coverage: Will nonrenewal be the next correspondence?

Here is an example of an E&O claim that went in a certain direction due to the carrier's expertise. It was brought against an agency for failing to advise the client of the cancellation of an Auto policy. The client's vehicle had been stolen and later recovered with $10,000 of damage. The Auto insurer denied coverage on the basis of a prior cancellation for nonpayment of premium. The client retained an attorney and made a claim against the agency.

A review of the events found that the agency had initially placed the client in the carrier's entry-level program. The premium was paid and continued in monthly direct-bill installments. At renewal, the agent was able to upgrade the policy for a lower premium. The carrier issued a revised renewal premium endorsement, then a cancellation warning, and finally a cancellation notice. The agency then sent the client a courtesy copy of a computer screen showing that the policy was cancelled, along with a note requesting that he call the agency. There was no response from the client until report of the vehicle theft. The client contended that he hadn't received the carrier's warning or cancellation notices, and alleged that the agent had told him not to pay the premium; he did acknowledge receiving the agent's courtesy notice.

This claim was resolved after a review by the E&O carrier, which helped the agency respond to the carrier that the account was on a direct-bill basis, with the carrier responsible for all matters pertaining to policy issuance, termination, premium billing, and collection. The carrier reviewed the matter and accepted coverage on the basis that it couldn't prove that the client was sent a cancellation notice.

Could this claim have been avoided? No, because the client failed to pay the premium. The agency's defense was successful because it documented the communications-and worked with its E&O carrier-at the claim's outset. This response was convincing enough to result in the Auto insurance company's review and acceptance of coverage.

So when you're looking at marketing your clients to other companies, compare more than just the price. It may make your decision much clearer.