Insurance Proposal E & O Benefits - Part 2
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. In Part 2, he provides key ingredients for every proposal and shares how a little preparation can go a long way to protecting your agency.
Accomplishing the E&O Benefits of Your Insurance Proposals
by Curtis M. Pearsall, CPCU, AIAF, CPIA
President - Pearsall Associates Inc.
Key ingredients of a proposal
Detailed explanations and definitions of key terms. Just because the agency understands the terms does not mean the client does. As you present the proposal, look for opportunities to ensure that the prospect understands the material. Avoid abbreviations if there is any chance the customer will not understand what they mean. Easy-to-understand information. Provide the material in a language that is not above the ability of the prospect to understand it.
Reference any mortgagee or loss payee you know of. It is amazing how this level of taken for granted. Failure to provide this has surfaced in a host of E&O claims.
Be as detailed as necessary. For example, if you are providing a proposal including Time Element / Business Interruption coverage, spell out exactly what coverage is provided or maybe include a specimen policyâ€ for reference. Many of the Exposure Analysis Checklists provide this level of detail for the various coverage forms. When dealing with Workers Compensation, based on the corporate structure of the entity, reference should be made to whether the policy affords coverage for sole proprietors/partners. On General Liability, it should be clearly stated if the policy is subject to audit. For a Professional Liability/ D&O policy, provide clarification on issues such as retro date and whether the defense is within or outside of the limit of liability.
Where applicable, include a statement that clearly denotes that higher limits are available. This would certainly be applicable in references to an umbrella or excess limits policy.
Include the financial rating for each of the carriers, with an explanation of what the rating means. It is recommended to use the exact definition as provided by that rating organization. .
Include a disclaimer. There is no way the proposal can include every single aspect of the insurance program. A disclaimer, such as the following, will provide a degree of E&O protection:
Information contained in this proposal is intended to provide you with a brief overview of the coverages provided for reference purposes only. It is not intended to provide you with all policy exclusions, limitations and conditions. The precise coverage afforded is subject to the terms, conditions, and exclusions of the policies issued.
In addition, if your agency has relied upon information provided directly by the prospect, consider including a statement such as 'this proposal is based on information provided and we cannot attest to the accuracy of this information.'
If any of the carriers referenced is non-admitted, provide an explanation of what this means. Verbiage such as the following is suggested: The insurance company does not participate in any of the insurance guarantee funds created by (the applicable state) law should the insurance company become insolvent and be unable to honor claim payments.
A clearer understanding
Obviously, at the end of the day, the goal of your proposal is to sell the account. It is rather interesting that enhancing your proposal with some quality E&O prevention tools may actually result in a more educated prospect. This could very well be the difference that helps you land the account and if a problem develops down the road, the detail provided in your proposal could be key in the defense of your agency.