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Insurance Proposal E & O Benefits - Part 1

One of our favorite expert contributors, shares his ideas for how to be sure your proposals help to prevent an E&O situation rather than make a bad situation worse in the event of a claim. Read Part 1 and then be sure to return for Part 2 later this week.

Accomplishing the E&O Benefits of Your Insurance Proposals 

by Curtis M. Pearsall, CPCU, AIAF, CPIA

President Pearsall Associates Inc.

While most agencies and their respective producers correctly look at insurance proposals as one of the key tools that will determine whether they land the account, in actuality, a quality insurance proposal can also provide some solid E&O benefits. The key word is quality because there is certainly the possibility that your proposals can cause you some E&O nightmares if a problem were ever to develop. How do the proposals in your agency measure up?

Typically, insurance proposals are broken down by line of business and list the coverages offered/proposed and the corresponding premium. They probably use abbreviations or phrases such as ACV or RC, co-insurance, or time element or business interruption coverage. As a producer, you may believe that this approach is okay since you understand what these abbreviations or phrases mean. How about imagining that you are the prospect? Does the proposal help you understand the insurance program? If not, while you may sell the account, you have not really achieved the E&O benefits of the proposal. In actuality, you may have hurt your E&O defense.

 

If an E&O claim developed, the defense attorney (defending the agency) and the plaintiff's attorney (defending your customer) would review the agency file as well as all of the specific documents involved in the procurement of the coverage. There is no doubt that the proposal you provided will be reviewed in depth. The goal is to ensure that when this occurs, the proposal helps your case, not hurts it.

 

Educate customers and prospects

 

Are your proposals structured strictly to provide an overview? If so, you may be missing an important element – one that may actually play a role in landing the account while also providing some quality errors and omissions protection. Look for your proposals to educate your prospects and help them understand their insurance program. They may know their business but do they really know the finer points of the insurance business? Educating customers and prospects has been shown to be a key issue in minimizing E&O claims activity.

 

Since customers and prospects heavily rely on proposals to make informed purchasing decisions, the best proposals clearly lay out the coverages offered, with documentation ultimately being made to detail what was and was not purchased. Oftentimes, these discussions are verbal. Without something in writing, any problems could involve he said, she said scenarios. Who wins these is anyone's guess. As a result, to ensure there is no misunderstanding, it is highly suggested to secure the insured's signature/acknowledgement detailing his or her buying decision.

 

To ensure thoroughness and consistency, a standard template detailing what the proposal should include and how it should be communicated should be used. This will insure that the proposals contain the necessary detail and explanation.

 

Watch for Part 2 later this week where Curt focuses on "Key Ingredients of a Proposal."

 

 

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