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ALSO IN THIS ISSUE ________________ How E&O prevention can increase sales Coverage checklists 7 voice mail tips to avoid E&O claims
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Contents
12
PRIMARY AGENT MAGAZINE
Gaps that sell: How E&O prevention can increase sales Checklists can go beyond protecting an agency’s bottom line from an E&O claim. They might just pad it, too. Read on for ways to turn coverage gaps into sales.
18
Page 12 Coverage checklists and E&O To use checklists, or not to use checklists: That is the question. Here, Chris Burand makes his case, touting the E&O claim prevention that checklists can supply.
Page 18
22
7 voice mail tips to avoid E&O claims Modern technology provides a slew of advantages for keeping the lines of communication open between agents and clients, but it comes along with E&O exposures, too.
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In every issue 4 5 6 7 8 10
Chairwoman of the Board’s Message Glance at Events State News New Members Preventing Errors & Omissions Coverage Corner
11 25 24 27 27
Member FAQ IA&B Partners Technology Update Advertisers Index Classified Ads
Subscriptions: Non-member price: $2.25 per copy or $15 per year. All communications for publications, including news, features, advertising copy, cuts, etc., must reach the editor by 1st of month two months prior to publication. Advertising rates furnished upon request.
Mission Statement Primary Agent delivers ideas to help Insurance Agents & Brokers’ members negotiate their unique position as guardians of trust between insurance consumers and companies while facing the challenges of maintaining a small business. Primary Agent also supports IA&B’s mission to preserve and advocate the American Agency System.
Address inquiries to: Primary Agent Editor PO Box 2023 Mechanicsburg, PA 17055-0763 Phone (800) 998-9644 or (717) 795-9100 Fax (717) 795-8347 Periodical postage paid at Mechanicsburg, Pa. and additional entry post office. Postmaster: Send address changes to above address. Primary Agent (ISSN 1543-3110), Permit # 638-620, Issue # 2009-10) is published monthly by IA&B Service Group Inc., a subsidiary of IA&B.
Copyright 2009. All rights reserved. No material may be reproduced in whole or in part without written consent of the publisher. The information in this publication is general in nature and is not intended to serve as legal, accounting, financial, insurance, investment advisory or other professional advice as to any reader’s particular situation. Users are encouraged to consult with competent legal, financial, insurance, investment advisory and or other professional advisors concerning specific matters before making any decisions and we disclaim any responsibility for any decisions or actions by readers. Statements of fact and opinion in Primary Agent are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of the IA&B. Participation in IA&B events, activities and/or publications is available on a non-discriminatory basis and does not reflect IA&B endorsement of the products and/or services.
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We’re the regional insurer you already know, always there to help independent agents with expert field support that understands local needs. Now that support is stronger than ever—because we’re stronger than ever. General Casualty has joined QBE®, providing local hands with the international reach needed to solve even your most complex challenges.
We are now QBE Americas Division. And we’re working for you.
generalcasualty.com General Casualty is a registered service mark of General Casualty Company of Wisconsin. QBE and the links logo are registered service marks of QBE Insurance Group Limited. All coverages underwritten by member companies of QBE. © 2009 QBE Holdings, Inc.
Board of Directors Officers Kathleen M. Glattly, ChFC, CLU, CPCU Chairwoman Factoryville, Pa. David Rosenkilde, CIC Vice Chairman Reisterstown, Md.
Kathleen Glattly CPCU, CLU, ChFC, AIM
Chairwoman O F
T H E
B O A R D ’ S
M E S S A G E
Robert J. “Buc” Cawley, AAI Immediate Past Chairman Wexford, Pa.
Members Norman F. Basso, CPCU York, Pa. Vincent D. “Chip” Boylan Jr., CPCU Rockville, Md. Timothy P. Burris Thompsontown, Pa. M. Scott Clemens, CIC, CPCU, CLU, ChFC Souderton, Pa. John T. “Chip” Colwell Jr., CIC Corry, Pa. Robert B. Hall, CPCU, CLU, ChFC, ARM, ARM-P West Chester, Pa. Linda A. McCann, AAI, CPCU, CPIW Salisbury, Md. Michael F. McGroarty Sr. Pittsburgh, Pa. Scott C. Rogers, CPIA York, Pa. Susan A. Sallada, CIC** Ft. Washington, Pa. William D. Schneider, CPCU, ARM* Pittsburgh, Pa. Robert A. Walbeck, CIC Homer City, Pa. David B. Wasson Sr., CIC State College, Pa.
The fright of E&O ERRORS AND OMISSIONS. Did that send chills down your spine? In the midst of your hectic schedule, the fear of an E&O suit likely lurks in the back of your mind. It nags the best of us. And it should because we’re all vulnerable. The topic, of course, goes beyond covering your agency. It’s a dynamic subject, which is why we’ve dedicated this issue of Primary Agent magazine to the many facets of E&O. In addition to the monthly E&O column (the October installment unveils the dangers when clients reduce coverage, which coincides with these challenging economic times), you’ll find two feature articles about checklists, one touting their use as E&O claim prevention, the other as sales tools. Finally, we’ve included voice mail-related E&O prevention tips, as well as a list of relevant seminars, on page 23. So when the fear of E&O haunts you, take heart. IA&B is there to support its members – with coverage solutions from a choice of quality markets and resources like the ones in this magazine and on iabgroup.com. Until next month, Kathleen
James M. Watkins* Dover, Del. King W. “Kip” White, LUTCF Fallston, Md. John S. Yasik, CIC Newark, Del. * IIABA National Director ** PIA National Director
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Glance at Events O C T O B E R C A L E N D A R Date
Topic
Location
1
CISR—Personal Residential course
Pittsburgh, Pa.
6
Best Practices of E&O Loss Control seminar
Allentown, Pa.
Mistakes That Lead to E&O Claims seminar
Erie, Pa.
P&C Licensing Study Course
Mechanicsburg, Pa.
CPIA—Insurance Success Seminars
Philadelphia, Pa.
13
CISR—Personal Residential course
Baltimore, Md.
14
Compliance Pitfalls seminar
Allentown, Pa.
CISR—Personal Residential course
Lancaster, Pa.
Coordinating Coverages Under the Company’s and the Employee’s Auto Policies seminar
Pittsburgh, Pa.
15
CISR—Agency Operations course
Philadelphia, Pa.
20
CISR—Agency Operations course
Salisbury, Md.
21
Dynamics of Service
Philadelphia, Pa.
21-23
CIC—Commercial Casualty institute
Allentown, Pa.
22
Dynamics of Service
Mechanicsburg, Pa.
27
CISR—Agency Operations course
Frederick, Md.
CISR—Personal Residential course
Mechanicsburg, Pa.
28
CISR—Personal Residential course
Reading, Pa.
29
CISR—Personal Residential course
Newark, Del.
6-8
Don’t wait for a CISR course to come to you — access it from your desktop! CISR OnLine is an excellent way to complete a course you need that may not be scheduled in your area in the timeframe you need it. You can also mix and match the CISR OnLine course with classroom courses so you can still maximize the benefit of networking and face time with the instructor. Register for courses online at iabgroup.com.
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Primary Agent | October 2009
State News Maryland Public Affairs Committee: Guiding Legislative Agendas for Agents
Ever wonder where IA&B gets direction for its legislative priorities and strategy for building an effective political action committee? The Public Affairs Committee, comprised of volunteer member agents, provides guidance to both IA&B government affairs staff and the Board of Directors on state and federal legislation, regulation, and AgentPAC — the political arm of IA&B. Led by a committee chairperson, the composition of the committee aims to represent all geographical areas of Maryland and include agents with a variety of specialties and backgrounds. Meeting several times per year, the Public Affairs Committee has recently tackled issues including seeking a legislative correction to condominium insurance coverage, initiating a dialogue with the Maryland Insurance Administration on the topic of property and casualty agent commission disclosure, and addressing the MAIF two turn-down rule with the MIA. The Committee is slated to meet one more time in 2009 in order to more firmly establish goals and priorities for when the state legislature reconvenes in Annapolis in January of 2010. Have an interest in legislative, regulatory, or political matters? Consider becoming part of Maryland’s Public Affairs Committee by contacting IA&B’s Member Service Center toll free at (800) 998-9644, option 0, or by e-mailing iab@iabgroup.com.
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AgentPAC update: where we stand for 2009
FloodSmart: October rate changes
With warm summer days now feeling long gone and crisp autumn air, pumpkins, and changing leaves now the norm, AgentPAC, the political action committee for Insurance Agents and Brokers of Maryland, is evaluating its finances for the year to date.
The National Flood Insurance Program (NFIP) announced several changes, including to rates for policyholders in all risk areas, effective Oct. 1.
So where does AgentPAC stand in relation to its goal? The answer is not encouraging. Specifically, our 2009 fundraising goal is $10,640. To date, receipts to AgentPAC total $5,700. Contributions are well behind where they need to be, and we have only attained 54 percent of our goal. The numbers paint a clear picture: without your support we will not succeed in our mission to make AgentPAC a stronger, more effective voice for independent agents in Annapolis. Your AgentPAC contribution gives IA&B political clout in the legislature, helping to produce results on issues that matter to the agent community. Can you make a commitment to help us reach our goal? IA&B Member Service Center representatives can take your contribution by phone when you call (800) 998-9644, option 0.
Perpetuation planning pointers
Producers should take note, as their customers are receiving their 60-day renewal notices and may find changes to their premiums and deductibles. The revised Flood Insurance Manual is available online at www.fema.gov/ business/nfip/manual200910.shtm. In addition, IA&B is offering a flood webinar, Understanding Flood Insurance, on October 13 to address the recent NFIP changes. Registration is available by visiting iabgroup.com or by contacting IA&B’s Member Service Center toll free at (800) 998-9644, option 0, or by e-mailing iab@iabgroup.com.
Perpetuation takes planning. A successful transition requires eight to 10 years to accomplish. That makes now the ideal time for baby boomers who are heading independent agencies to plan for their retirement. IA&B’s Oct. 27-28 Executive Management Conference for agency owners will focus on perpetuation planning. MarshBerry presenters will cover how to design a successful plan that drives value, rewards individuals and ensures long-term organizational viability. Topics will include proactive control of agency value, exit alternatives and economic factors. Registration remains open. For more information, visit iabgroup.com or contact IA&B’s Member Service Center toll free at (800) 998-9644 or locally at (717) 795-9100, option 0.
Every contribution brings us closer to achieving 100 percent of our goal. Simply put, your support is needed now and is critical to our success in Annapolis.
WELCOME
New Members
Federal Insurance Federation Inc. Rockville, Md.
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Associated Insurance Centers of Southern MD LLC Leonardtown, Md.
Primary Agent | October 2009
Preventing ERRORS AND OMISSIONS
THE PITFALLS OF REDUCING COVERAGE
PAUL E. WALTERS Paul E. Walters is claims manager for Utica Mutual Insurance Company in Utica, N.Y. Insurance Agents & Brokers Service Group Inc. is the exclusive agent for the Utica E&O program in Delaware, Maryland and Pennsylvania. For questions regarding this article or your Errors & Omissions coverage, contact IA&B at (800) 998-9644 or by e-mail at iab@iabgroup.com.
There are a lot of valid reasons why an agent may request reduced coverage for a client. But that doesn’t stop an E&O claim from being made. After an economic loss, the client’s memory may be different from the agent’s, and he or she just may not recall requesting that reduced coverage. Two stories emerge, leaving a jury to flip a coin. Let’s first go back to those reasons a client might request lower coverage amounts. A change in exposure may warrant less coverage. Concerns over premium costs
may warrant a change in coverage – and in the current economy, that can happen often. A change may be made to a law so certain types of claims to which a client had previously been exposed are no longer legally viable. Or the imposition of award caps for certain types of personal injury actions by state legislatures may greatly lower a client’s exposure. The reasons are all valid; however, communication with the client is the key. And good documentation of such conversations is a must.
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Take, for example, a claim by an owner of a large, sixbuilding apartment complex. Business was slow, and the client approached the insured and asked that two of the buildings be removed from coverage on the Commercial Property policy to save premium. Those buildings were removed from the policy. The policy was subsequently written by another carrier, and only four buildings were listed. (In that particular state, there is no duty for a client to read and examine a policy.) After policy inception, the client – without telling the agency – decided to rent the two vacant buildings out to victims of Hurricane Katrina, at government-subsidized rates. A fire occurred, and the two buildings were destroyed. While the agent’s file contained a copy of the request to the previous carrier to remove the buildings, there was nothing in the agent’s file documenting the discussions with the client. The client stated that he had not wanted
the buildings removed. Nothing was sent to the client by the agency memorializing the request to remove the buildings. The damage to the two buildings was approximately $1,000,000. Faced with a word vs. word scenario with no documentation to back up the agent, the case was eventually settled for $500,000. In another example, a restaurant asked its agent to reduce the contents’ coverage mid-term from $275,000 to $150,000. The carrier lowered the limits as requested and issued a refund which the client cashed. The policy renewed. And yes, a claim came. A large one. Following a total loss to the building, the carrier paid the $150,000 limit for contents. The client claimed he did not read the new policy and said he thought the refund check was due to a car being removed from a personal auto policy. He claimed he never asked for a reduction in coverage. Again, there was no correspondence from the agency to the client documenting the request for a reduction in coverage. Following a trial in the matter, the jury chose to believe the client and awarded $125,000 plus interest and attorney fees. During hard economic times, clients will look for ways to save premium. Agents will look to hold onto current clients by keeping premiums down. Carriers will push agents to market their products in the best economic light to avoid competition. And regardless of the circumstances, agencies will be vulnerable when there is no clear documentation reflecting that a client has been told of the reduction and is well aware of the risks involved in the event of a loss.
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Primary Agent | October 2009
Coverage CORNER
THE CGL – COVERED LOCATIONS AND OPERATIONS JERRY MILTON, CIC Jerry M. Milton teaches and consults on industry
I just completed an application for a Commercial General Liability (CGL) policy. I was asked to list all of my locations and operations. I think I did. I hope I did.
issues. The legal profession recognizes him as an expert on insurance coverages. He is also the education consultant for IA&B, working with CISR, CIC and continuing education programs.
What if I did list all locations and operations, but I add another location or start a new operation during the policy year? Or, what if I didn’t list them all? Will this affect my coverage under the CGL? Long ago, and far, far away, we used to write an Owners, Landlords And Tenants Liability (OL&T) policy. That policy covered bodily injury or property damage arising out of “the ownership, maintenance or use of the insured premises and all operations necessary or incidental thereto.” The “insured premises” was any location listed in the Declarations. That OL&T policy is now just a faint memory. Today’s CGL policy is not an OL&T! It is true that the CGL Declarations does contain
sections to list all premises, owned, rented or occupied by the insured and all classifications of the insured’s operations. However, the terms “premises” and “operations” are not defined in the policy. And nowhere in the policy are there any location or classification restrictions. Therefore, if I add a location or start a new operation during the policy year, I’m covered. Period. End of discussion. Sure the insurer would like for me to notify them of this new location or operation. Obviously they would like to get their money now for that exposure. But, rating and coverage are separate issues. If I don’t notify them, I still get my coverage now. They’ll get their additional premium for the additional location or operation at the end of the year. It’s called an audit. What if I didn’t list all locations or operations? Does this negate coverage under the CGL for any location or operation not listed? The [ 10 ]
Representations condition of the CGL states that the representations made in the Declarations are accurate and complete and the insurer has issued the policy in reliance on those representations. In order to deny coverage, the insurer would have to prove that any misrepresentation is “material.” What is a material misrepresentation varies from state to state or court to court. A material misrepresentation is usually one that, had the insurer known the true facts, they would have acted differently. They may have declined the coverage or issued the policy with more restrictive terms. If an insurer refuses to pay a claim based on material misrepresentation, they are not just denying the claim; they are attempting to void the policy. In most states a material concealment or a material misrepresentation can be grounds for rescission of the contract.
Rescission is an equitable remedy created by the early courts of England. When an insurance policy is rescinded, the parties are put back in the same position they were in before the contract date. The insured gets the premium back, and the insurer gets the policy back.
Member FAQ QUESTION: How can I verify that an agent or agency is properly licensed in my state? Is there a way to do this without having to ask the person directly?
?
ANSWER:
A material misrepresentation is often difficult to prove. But, do insurers attempt to do so on occasion? Yes, they do.
Most states now offer the ability to check if a person, individual or entity, resident or non-resident, is properly licensed and in good standing. You can go online directly and check whether the insurance producer and/or the agency is properly licensed.
If an insurer wants to limit coverage under the CGL to a specific or scheduled premises, they can do so by adding the Limitation Of Coverage To Designated Premises Or Project endorsement (CG 21 44). This endorsement covers “the ownership, maintenance or use of the premises shown in the Schedule and operations necessary or incidental to those premises.” Sounds like the old OL&T policy doesn’t it? The more things change, the more they stay the same.
Delaware: Go to the Department of Insurance’s Web site: www.delawareinsurance.gov. In the left margin, under Services, click on Insurance Agents. This will take you to the license verification and status page.
Insurers are also limiting coverage for operations by adding their Classification Limitation endorsements. These endorsements stipulate that coverage is provided only for those classifications shown in the Declarations. Finally, an endorsement that should be added to the CGL and Excess Liability policies is the Unintentional E&O endorsement. This endorsement states that the unintentional omission of, or unintentional error in, any information by the insured shall not prejudice the insured’s rights under the policy. Once again, the CGL does not restrict premises and locations. However, watch out for limitation endorsements – either premises, or classifications, or both. And try to get the Unintentional E&O endorsement. It’s a good one! Y’all take care!
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Maryland: Go the Maryland Insurance Administration’s Web site: www.mdinsurance.state.md.us. In the left margin, under the Producers tab, click on Producer Search. A database query is available for both individuals and agencies. Pennsylvania: Go to the Insurance Department’s Web site: www.ins.state.pa.us. Under Resources for Producers, you will have access to two different databases — one for individual licensees and one for business entities. In all three states, the databases are searchable on a number of different criteria including name, type of license, location, etc. Tip: Tag the Web page as a favorite. Doing business with an unlicensed person is a violation under most, if not all, producer licensing laws. Whenever you are doing business with another producer or entity, including when you are placing a risk through a Surplus Lines broker, make it a habit to check that both the individual and entity are properly licensed in the state where the license is needed.
DO YOU HAVE A QUESTION? E-mail it to us at iab@iabgroup.com. Please use “Primary Agent FAQ” in the subject line of your message. You can also fax your question to (717) 795-8347. We look forward to answering your questions!
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Gaps that sell How E&O prevention can increase sales
Checklists can go beyond protecting an agency’s bottom line from an E&O claim. They might just pad it, too. Read on for ways to turn coverage gaps into sales.
Primary Agent | October 2009
II
nsureds depend on their agent for protection, but too many agents depend on price to close the deal and “win” the client. Winning on price can be a Pyrrhic victory because making the “war” about price kills a majority of opportunities to establish a long-term relationship. Without a protection or risk management-based relationship, the agent will lose the client the same way he gained it — on price. Insurance is not a commodity. Correctly designed protection in the wake of a major loss is the difference between the insured’s utter financial destruction and its restoration to financial health. Agents are and must act like more than mere “order takers,” they must be the professionals the protection they offer requires. Becoming and practicing like a professional insurance agent necessitates analysis of the client’s exposures and an understanding of the applicable insurance policy’s limitations and exclusions. Checklists are the tools of insurance professionals; their use confirms that all relevant questions are asked, but more importantly they reveal coverage gaps.
_________________________________________________ Checklists are the tools of insurance professionals; their use confirms that all relevant questions are asked, but more importantly they reveal coverage gaps. _________________________________________________ Checklists win clients Checklists: Every errors and omissions underwriter and loss control representative wants agents to use checklists. Agency consultants continually push the use of checklists. Agents, like the Grinch, imagine all the “noise” they are going to hear at the next E&O class about, you guessed it, checklists. But beyond the hyper-importance of protecting the agency in an E&O suit, checklist can actually help agents SELL MORE BUSINESS and MAKE MORE MONEY. The “hassle” of using a checklist disappears when viewed from the perspective of increased income. But how do these annoying checklists help the agent sell more business? “Gaps” is the magic word — gaps in protection, gaps in the limits, all manner of gaps. In other words, checklists find the gaps that sell the client on the agent, allowing the agent to gain a new client and write more business. Regardless of the coverage or client type, there are always gaps between the true exposure and the protection provided.
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Checklists find the gaps that sell the client on the agent, allowing the agent to gain a new client and write more business.
SALES
Some gaps are purposed and others are a surprise to the client. It’s the surprises the agent needs to discover, explain and win the client with. This is done with … checklists.
“Common” coverage gaps (“type 1.A.” gaps) require skillful introduction and explanation. The mention of these gaps and their solutions should be conversational and not presented “checklist style.”
Gaps lead to opportunities: the opportunity to unseat the incumbent agent; the opportunity to develop a strong agent/client relationship; and decreased likelihood the client will move solely due to a lower premium.
“Checklist style” sounds like this, “Looking at my notes from our meeting, it appears that you have some unique exposures that we need to discuss,” (the “notes” are, of course, the checklist that was completed). Don’t misunderstand, the “checklist style” is not wrong, in fact this is the approach for “type 1.B.” gaps; but it is not the best approach for gaps common to a large percentage of insureds.
No more talk of checklists!
Beyond the hyperimportance of protecting the agency in an E&O suit, a checklist can actually help agents sell more business and make more money.
There is no more talk of checklists from this point forward, lest you tire of the conversation. The remainder of this article details the two classes of coverage/exposure gaps: 1) those that will almost certainly result in winning the client when presented; and 2) those that don’t necessarily win the client but rather serve to cement the agent/client relationship.
Gaps likely to get the agent hired (aka: “type 1” gaps) “Type 1” gaps themselves fall into two subcategories: A) those common enough that a majority of insureds within a particular class have the exposure; and B) gaps so uniquely situational and rare that only a very few insureds actually have the exposure. Both will win the client, but each requires a different approach.
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A conversational approach to common coverage gaps is more effective because it is not necessarily required to first find out if the insured has the exposure, because most within a specific class do. The goal is to impart important information about these common gaps to the insured and then tell them how to fill the gaps. Assume the insured owns a 20-year-old building; it’s likely the building is not totally compliant with the current building code. The unendorsed commercial property policy does not respond to this exposure, it requires the attachment of the ordinance or law endorsement (as detailed in an earlier series). Before meeting with the insured, the agent researches
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SALES
the jurisdictional building codes. At an appropriate place in the meeting (when the question regarding the age of the building is posed), the agent pauses and says, “I was reviewing the local building codes and noticed that [name of jurisdiction] has some unusual requirements. If your building is damaged beyond 50 percent of its MARKET VALUE, it has to be torn down and rebuilt to current building codes. This could be costly.” Obviously the information presented to the client must be true and relevant. In the above example, the agent has the
opportunity to explain the problem(s) (as there are multiple issues) and the solutions. Because most buildings within this “class” (more than 10 or 15 years old) don’t meet building codes, the agent was able to plan ahead and proactively offer a solution (conversational style) rather than reactively find a solution (checklist style). Conversational style doesn’t look like or feel like selling; it’s an exchange of information that builds trust. If the client is unconcerned with the exposure, it’s still in the notes that the exposure was discussed. This
style also moves the insured away from basing the decision on price alone. ______________________________
Capitalize on the gaps to win and tie yourself to the client for the long term. ______________________________ Differentiating between “1.A.” and “1.B.” gaps is rather simple. While both are hot-button gaps that should convert a prospect into a client, “1.A.” gaps are general in nature applying to all insureds in a particular class (i.e. all homeowners’ policies exclude personal injury, older buildings don’t meet code, etc.) where “1.B.” gaps are operational in nature. An operational gap is specific to the insured and is only known once the checklist is complete. The difference between the general nature and operational nature of these gaps gives rise to the different styles (conversational vs. checklist) used to discuss both. Agents must look for, prepare for and capitalize on both of these client-winning gaps. Advanced preparation and policy knowledge are required.
Gaps that cement relationships (aka “type 2” gaps) “Type 2” gaps are those that don’t cause immediate panic or need in the insured; but those on which the insured wants to invest more time and
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Primary Agent | October 2009
discussion. Being able to act as a trusted authority and advisor allows the insured to build trust in the business relationship. Common “type 2” gaps/exposures include coverage limits, valuation methods and contractual risk transfer issues. These, like the “1.B.” gaps above, are nearly always operational exposures unique to the insured. In the client’s mind, these exposures/gaps do not require immediate attention; but they
want the agent to invest time in researching the answers and offering alternatives. Again, “type 2” gaps are not necessarily client winners (but they could be), but they are relationship clenching. Addressing these issues will tie the client to the agent far better than price.
business being pursued). Capitalize on the gaps to win and tie yourself to the client for the long term.
__________________________ Christopher J. Boggs, CPCU, ARM, ALCM, LPCS, AAI, APA, CWCA © Insurance Journal, InsuranceJournal.com and MyNewMarkets.com
Synopsis Use checklists to find gaps. Hot button gaps require preparation and study (agent has to know coverage and about the class of
HELPING AGENCIES AVOID COSTLY E&O CLAIMS That’s how we deliver distinction.
IA&B HAS OVER 50 YEARS OF EXPERIENCE TRAINING AGENCY STAFF By attending IA&B training programs, your staff will have the skills to provide proper coverage and avoid costly E&O claims. No one knows E&O like IA&B. Don’t trust your employee training to anyone else. FOR MORE INFORMATION, VISIT IABGROUP.COM OR CALL THE IA&B MEMBER SERVICE CENTER AT (800) 998-9644.
Driving members to distinction
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Coverage checklists and E&O To use checklists, or not to use checklists: That is the question. Here, Chris Burand makes his case, touting the E&O claim prevention that checklists can supply.
Primary Agent | October 2009
Fact: Most agencies do not use coverage checklists. Question: From an E&O perspective, should they? One of the weak arguments agents often make for not using coverage checklists is that they believe if they use coverage checklists and mess up, they will be in more trouble than if they did not use checklists at all. This argument clearly rests on the assumption that a person would rather be providing inadequate coverages to all clients rather than providing the right coverages to some and not others. An opposing attorney in court would probably summarize this by asking, “So, you prefer being incompetent all the time instead of just some of the time?” A case covered in the Nov. 14, 2005 National Underwriter clearly blows this argument out of the water. The author of this great article, Peter Biging, describes the legal reasoning behind an appellate court ruling against a broker for not offering a specific coverage to an insured. The really interesting aspect of this case is that the carrier had already been sued and had already paid! In the author words, “… the court held that the issue of whether the insurer should have defended the claim was independent from the issue of whether the business manager and broker failed to provide competent advice.”
_________________________________________________ The issue really rests on one question: “Are clients depending on you to identify coverages they should consider purchasing?” _________________________________________________ In other words, the court’s position in this case was that the broker was not only in the business of selling insurance but in the business of providing professional advice, too. The broker was responsible for offering professional advice whether a checklist was used or not. So why not make life easier and less risky by using a coverage checklist? This case is not unique for finding that agents and brokers owe clients professional advice. Many cases and many jurisdictions, though certainly not all, hold that if agents and brokers tout themselves as professionals, then they owe professional advice to their clients. This case is even more poignant though because the carrier paid the claim and the broker still lost. In a must-read article, “Insurance Agent and Broker Liability” by Douglas R. Richmond in the Tort Trial & Insurance Practice
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The court’s position in this case was that the broker was not only in the business of selling insurance but in the business of providing professional advice, too.
SALES
Law Journal, Fall 2004, the author clearly makes a distinction between those agents and brokers that present themselves to the public as experts and/or professionals versus those that simply peddle insurance. The peddlers clearly have less responsibility to advise clients of coverage issues. To me, the issue really rests on one question: “Are clients depending on you to identify coverages they should consider purchasing?”
Insureds will probably buy more insurance, and the more insurance they buy, the less likely they will have an uncovered or contested claim.
After a loss, clients will often claim they were depending on their agent or broker. So if you are going to be a peddler, have insureds sign a statement saying they do not consider you to be a professional or an expert in insurance coverages and therefore did not depend on you to advise them in any way. If you do not like this approach, a coverage checklist is your best option. Used early in the fact-finding process, it can minimize quote time and minimize the importance of price. With a coverage checklist, the agency is better protected because the insured is taking responsibility for selecting coverages (if the checklist is used appropriately which involves completing it with the insured present and with the insured signing it). The agency can also better document that
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it considered and discussed a long range of coverages with the insured. Last, insureds will probably buy more insurance, and the more insurance they buy, the less likely they will have an uncovered or contested claim. (For free sample checklists, go to www.burand-associates.com.) Few agencies use coverage checklists, and with the way case law seems to be evolving, insurance professionals are going to be held to higher standards in many jurisdictions. So, how would you answer the question: “From an E&O perspective, should agencies use coverage checklists?”
_________________________ Chris Burand is president of Burand & Associates, LLC, an insurance agency consulting firm. Readers may contact Chris at (719) 485-3868 or by e-mail at chris@burand-associates.com. Note: Every state and every situation is different, so obtain legal advice specific to your state and situation. None of the materials in this article should be construed as offering legal advice, and the specific advice of legal counsel is recommended before acting on any matter discussed in this article. Regulated individuals/entities should also ensure that they comply with all applicable laws, rules and regulations.
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7 voice mail tips to avoid E&O claims Modern technology provides a slew of advantages for keeping the lines of communication open between agents and clients, but it comes along with E&O exposures, too.
Primary Agent | October 2009
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hen customers land in a voice mail, they must be advised by the message that their expressed need for coverage does not put coverage in effect and that they must speak with a licensed agent.
The following tips can help prevent E&O situations: Q Update outgoing voice mail message on a daily basis. Q Always provide an option for callers to reach a “live” person in the office during normal business hours. Q Include a disclaimer on the voice-mail greeting that explains how coverage requests and claims are handled. For example: You have reached the voice mail of <your name> on <today’s date>, and I will be out of the office all day. Please leave a detailed message, and I will return your call as soon as possible. If you require immediate assistance, <provide directions for reaching other staff> who can assist you. Please be aware that coverage cannot be bound or changed via voice mail, e-mail, fax, or online via the agency’s Web site, and is not effective until confirmed directly with a licensed agent. Thank you for calling, and have a great day. Q Keep the system simple, and avoid putting the caller through multiple layers to speak to someone in the agency. Q As soon as possible, input all information from phone conversations and voice-mail messages into the agency management system. Include the name of the caller, the date/time and message. Q Confirm in writing with the client any requests received by voice mail. Q Create written procedures for handling personal voice-mail boxes of staff members who are out due to vacation or illness.
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Get in the know about E&O What you don’t know can hurt you … and your agency. That’s why IA&B offers three E&O seminars, each of which have been approved for loss-control credit. Q Best Practices of E&O Loss Control Q 10 Ways to Get Sued Q Mistakes That Lead to E&O Claims — new for 2009 For information or to register, visit www.iabgroup.com and select Errors & Omissions from the left-hand menu, or contact IA&B’s Member Service Center at (800) 998-9644 or locally at (717) 795-9100, option 0.
Primary Agent | October 2009
Technology U P DATE
SEO: NOT JUST FOR THE TECHIES How your agency can use search engine optimization in its business plan
MELISSA CIBELLI Melissa Cibelli is PIA’s public relations specialist.
This article is reprinted from the July/August edition of PIA magazine.
If you’re involved at all in working with your agency’s Web site, you’ve no doubt heard the phrase “search engine optimization” many times before. It’s a relatively new technique in Web site marketing, a must-have for any site that wants to draw an increase in traffic. But, if you’re scratching your head, thinking, “What the heck is this SEO stuff,” it’s a simple concept to understand. SEO is just what it sounds like — optimizing your Web site to obtain a higher ranking in search engine results. Sounds
easy, but don’t be deceived — even some self-proclaimed SEO experts don’t have a handle on it. Search engines work by indexing, “crawling” or “spidering” the content on Web sites across the Internet and ranking them based on relevance to certain search terms, determined by complicated algorithms. These formulas take into account different aspects of your site, such as content, titles, etc., and weighs them against one another, ultimately determining a numerical rank for your page
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for the given keywords. The problem for SEO professionals is that these algorithms are highly protected company secrets, with good reason: Anyone could manipulate search results if they were privy to the formula. Unfortunately, this makes the art of SEO more difficult, though not insurmountable. The good news is that you can do SEO yourself, for free. Unlike paid advertising, called search engine marketing, SEO works on raising your ranking in what are called “organic” search results; that is, the results not
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TECHNOLOGY UPDATE
impacted by anyone’s advertising dollars, and instead based solely on site content. As a result, only sites with legitimate content that is relevant to the search query will come up in the top rankings; companies cannot “buy” a search rank. The closest relative of this method is the aforementioned SEM, where ads end up alongside organic search results, clearly marked as paid advertising. You may be asking yourself: Is SEO really worth all the effort? Does SEO even matter? According to a study at Cornell University, the top-three search results from Google get 79 percent of all clicks; in other words, three quarters of users never bother to look past these first few results, much less another page. Your site might as well not exist if your agency is unlucky enough to end up on the dreaded “page two.”
Now, how can you make SEO work for your agency site? You can start by figuring out how your customers think. Pick keywords carefully If you’re a small, local agency based in Albany, NY, odds are you’ll be listed on the hundredth page or so for a search of “New York insurance.” But, you’re more likely to be on the first page of a query for “Albany New York car insurance.” You need to pick your keyword battles. While your agency may not stand a chance against the big guys when it comes to more generic insurance search terms, you can have success with more specific, local queries. Think about the search terms your potential customers might be using to find your agency. Those are the terms on which you want to focus. These terms might include: ZIP code; town; state;
agency name (or part of the agency name); and/or type of coverage (homeowners, auto, business interruption, etc.). From these keywords, settle on about 10-30 search queries that you believe customers will use when looking for your services; these will be centerpiece of your SEO efforts. Google yourself Take a look at your list of key search phrases. Try typing each one into a search engine like Google. Where do you stand? Are you already coming up at the top for some of your important search terms? Or, has your agency been relegated to the dark depths of page-five obscurity? Establish a starting point, so you can measure continuously your work and gauge the success of your SEO efforts.
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Classified ADVERTISEMENTS Work from the ground up Content is king. Without good content, your efforts in SEO are all but useless. Search engines are smart, and nothing beats quality original content when trying to reach the top of the rankings. Think of your site in terms of potential clients; what can you provide for them via the Internet? Positioning yourself as a local resource for insurance needs rather than just a repository for agency contact information will help make your content more valuable. Also, try to incorporate your targeted keywords and phrases in meaningful ways throughout your site. Don’t fall into the trap of just tossing these words in anywhere you can — a search engine will pick up on this and likely lower your ranking for fraudulent practices. Mind the “meta data.” Meta data is the invisible information provided to search engines by your Web page. So why aren’t you taking advantage of it? Meta data gives you to opportunity to tell search engines exactly what your page is about. Want to see what your Web page’s meta data contains right now? Right click your page and click “View Page Source.” Look for any tags that include the word “meta”— this is where you will find the information you need. This data falls into two categories: keywords and description. Your keywords should mimic the ones that you determined for your site earlier, while also including specific terms for the page that you are working on. For example, a page focusing on your commercial-lines offerings should include phrases like “business insurance” or “corporate car coverage.” Your description should explain exactly what it is that is found on your page (i.e., “The Smith Agency is a full-service professional insurance agency offering personal and commercial-lines policies in Albany, N.Y.”) The description
also is the short blurb that appears after a link to your site in search results — so make it valuable and accurate. If your meta data doesn’t seem up to par, ask your site’s Web master to update it with the keywords and descriptions that suit your agency best. Eye-catching titles. Often thought to be one of the heaviest contributors to being found on search engines, page titles often are overlooked. Think of page titles just as you would book titles while browsing in a store—the title needs to be interesting and compelling in order for you to decide to purchase it. The same goes for your Web site; your title needs to be descriptive, specific and enticing to your audience. Create links. Your ranking in search engine results not only is a result of your own site’s popularity, but the popularity of sites that link to you. So the next step in upping your rank is to find relevant sites that could potentially link to you. Notice the word relevant — it will do no good for an insurance agency site to have a link on a celebrity gossip site. The pages you want to be on need to be related to your site’s content—think industry associations, your local chamber of commerce, carriers you do business with, etc. And, while a simple text link will help, having a link back that is incorporated in content, directly related to your business, is the best kind of boost for your ranking. How do you get started? Make a list of all the organizations and companies with which you already have a relationship and offer reciprocal links — that is, a link from their site in exchange for a link from yours. Search engines are blind. Usually shortened to “alt tags,” alternate image text has proven to be another invaluable method of incorporating your keywords
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TECHNOLOGY UPDATE
into your Web site. Search engines cannot actually see pictures (yet), thus rely on the alt tags to determine what an image is displaying. Take advantage of these tags as an opportunity to employ keywords effectively and help direct search engines to your site. Claim your identity If you have ever run a search for your agency name, you may have noticed that search engines will have some kind of local business results. Google, in particular, does a nice job of this, providing a map and directions to your business. But, what if that information is wrong? The Internet is not infallible, and it is your responsibility as the representative of your agency to take control of your online identity. How to do it? Google pulls its local results from Superpages.com — search for your business there and click on the “Add Info” option. There, you can claim ownership of your agency and add useful information to the listing: services offered; hours of operation; key contacts; etc. Other search engines, like Yahoo! and MSN, also will allow you to manipulate your agency’s listing, so be sure to take a look at you results across as many sites as possible. Additionally, you can help assure correct listing information by submitting your Web site directly to each search engine. This not only will make sure that your agency is depicted accurately via search, but also can help boost your ranking in search results. You can start by checking out Google’s site submission at google.com/submityourcontent. Patience is a virtue So you’ve followed this advice and you should now check Google feverishly to see your agency results skyrocket, right? No — you need to have patience when it
comes to SEO. It might take up to six months for your ranking to be affected. Sure, it’s frustrating; but more than understandable when you remind yourself that sites like Google are responsible for indexing and maintaining accurate search results for the millions of Web pages on the Internet. It’s quite the workload, and it means that your site may not be a top priority. Now what? Just because you’ve initiated the SEO process doesn’t mean that you can wash your hands of it. Maintenance is the key to keeping a top search-result rank. Start with your content: keep it fresh; be sure to update it regularly. What good is a Web site with information that is years old? On the same token, aim to update your title tags and meta data every six months or so, in accordance with your
new content. This will ensure that search engines are indexing your site properly and giving suitable results to their users. You also may want to consider hiring a professional to manage your SEO efforts, particularly if you are not well versed in Web design or Internet marketing. Whether a firm or a freelancer, an experienced hand can help you easily set up and continuously monitor your work on SEO. Whether you take it on yourself or decide to hire an old pro, SEO is not something you can continue to ignore. Where you fall in search engine results is important; taking action to improve your ranking can help potential clients find you quickly and bring new business through your front door today.