Let Good Business Practices Be Your Guide

by Curtis Pearsall

Having started work in this great industry in 1975 as a CSR for an independent agency, I have a fairly good sense of the changes that agencies have gone through over the years. Certainly without question, today's agents look quite different from their counterparts in the '70s!

It appears that agents today want to offer a wider range of products to a wider range of clients. Items such as PEOs (Professional Employer Organizations), loan origination, and extended warranties are products that agents have traditionally not marketed. In today's marketplace, the need to diversify is stronger than ever. The use of the Internet as a vehicle for marketing is also supplanting the traditional approach.

When considering involvement with these products, it's important to approach them in the right context. A good business practices approach is to ask yourself the five Ws: who, what, where, why, and when.

• You should certainly know 'what' the concept is all about. This will help determine if it fits into your business strategy.
• Proceeding with the 'why' part is the logical next step. Why should I want to market the PEO concept or use the Internet for marketing? If you can't answer that question, you might not need to go any further.
• Identifying 'who' is going to handle the product (in both sales and support) and what training they will need.
• The 'where' part is probably the easiest consideration.
• The 'when' is very important. Lay out a timetable that allows you to set up the structure (personnel, training, space, marketing, etc.) that will enable you to achieve the results you desire. Proceeding too quickly will cause things to fall between the cracks; proceeding too slowly could cause you to miss some business opportunities.

As with traditional insurance operations, a number of good business practices are equally important. Education certainly is, and so is communication with your staff and your clients. Some type of exposure analysis checklist gives solid evidence of your professionalism and will, among other things, reduce your E&O risk-as you can see in this story:

A trucking firm brought a suit against an agent for failing to provide adequate Liability limits on its Commercial Auto policy. This came to light after an auto accident in which the client's tractor-trailer rear-ended an auto that was driven by a pregnant woman, who then went into a coma. The trucking company's carrier paid its $300,000 liability limit and the trucking firm agreed to a $3.6 million arbitration award, assigning its inadequate limits claim against the agent to the injured plaintiff.

The agency defended itself on the basis that there was an originating broker and that the coverages had been provided as requested by the trucking firm, which never raised an issue over these limits for the eight years before the accident. The case went to trial and the court ruled in favor of the agent, saying that there was no duty owed in regard to higher limits. The agent in this case represented the carrier, not the client. The originating broker, a co-defendant, did resolve its exposure by a negotiated settlement. In this claim, the agent was positioned as a wholesaler, and the defense was able to show that the agent had exercised good business practice, with a well-documented file that demonstrated that the Liability coverages were provided as requested in accordance with the duty owed.

No matter what you sell or market, it's appropriate to apply good business practices as your guide. Do it with your eyes open and with ethics and professionalism in mind, and things should work out just fine.