Best Practices For Marketing and Selling

Obviously, obtaining new business is the heart of agency operations. New business begins with marketing and selling. Marketing is everything that leads up to a sale. It involves promotion, advertising, telemarketing, and direct mail campaigns. In contrast, selling takes place when a seller meets a prospective buyer. This may occur by phone, in person, or, more recently, by interaction with an agency’s web site. Any of these activities can pose an E&O threat for the agency.

You haven’t even written the account, yet you must be careful to not create E&O exposures.

In this section:

Best Practices Ideas for:

Self-Audit
Sample Letters / Documents / Wording
Sample Procedures

Advertising and Marketing

Now that computer technology, scanners, and color printers are relatively inexpensive, many agencies are producing their own high-quality advertising materials. The increased use of the Internet as a marketing tool also creates some concerns when it comes to E&O.

It is important that your advertising not overstate the benefits to be provided by an insurance policy or program. State laws also apply to false or deceptive advertising. Familiarize yourself with Texas statutes and regulations.

The Best Practices for Avoiding E&O in Advertising and Marketing

Always check advertising and marketing materials to be certain they do not over promise benefits of policies or services to be received – See E&O Tip [#1]

  • Avoid use of terms like “all risk”, since they imply that coverage is more broad than is actually the case
  • Be sure that everyone in the agency, including producers, have any materials they develop themselves reviewed by others prior to distribution
  • Remember that the same rules for printed materials apply to the agency’s web site
  • Familiarize yourself with Texas statutes and regulations.
  • Develop a written procedure for the review of marketing and advertising materials

Account Reviews

One of the most important value-added services an agency can provide is to complete a thorough review of a prospect’s exposures to loss. This is, after all, the first step in the risk management process and failing to identify exposures limits the insured’s ability to determine which technique should be used to treat the exposure.

While it is important for agents to thoroughly review a prospects’ current insurance program and gather as much information as possible for proper underwriting and to arrange coverage, agents should not lead a client to believe that they are the client’s risk manager, or that they will conduct a complete audit of the insured’s exposures. If they do, they can be held liable for any exposure that was not identified and not insured. 
There are many sources of information available to agents and brokers including:

  • Physical inspections
  • Interviews with key personnel
  • Review of financial statement
  • Review of contracts and agreements with vendors, suppliers, landlords, tenants, and others for insurance requirements
  • Review of the client’s advertising materials, brochures, and web site to gain a complete understanding of the prospect’s operations
  • Flow charts to analyze the basic processes of the client
  • Surveys and checklists

While a physical inspection is usually the best method to uncover loss exposures, it is not always possible or practical.

Surveys and Checklists

Many agencies use coverage checklists to identify uncovered exposures and document coverage rejections by the customer. E&O experts recommend that agencies establish a written procedure regarding the use of checklists, but some agency principals are overwhelmed by the prospect of completing a checklist every time they write or renew a policy. It doesn't have to be that way. The procedure can be discriminatory so that it doesn't include every prospect who walks in the door for a single policy or every renewal customer. But if a checklist isn't used on a particular account, then the agency should offer the service in writing. For example, include the following wording (or something similar) in the letter you send to the customer after issuing or renewing their policy: "We offer a full range of insurance products and would welcome the opportunity to meet at your convenience to discuss all your insurance needs. Please contact me and we will set up an appointment." Here are some other things to consider when developing this procedure:

  • There should be a single checklist or system of lists used by all agency personnel.
  • The checklist should be an "industry-standard" checklist rather than an agency-produced checklist.
  • The procedure should establish a baseline requirement for checklist completion - type of account, size of account, new and/or renewal, number of policies, etc.
  • The procedure should dictate when the checklist must be completed (during the renewal review, when the proposal is delivered, or when the policy is delivered) and who is supposed to complete it (the producer or CSR).
  • Most importantly: the procedure must be mandatory - no exceptions. Compliance with the procedure should be a key ingredient in employment reviews and producer compensation plans.

Insurance surveys and checklists are available from a number of sources, including electronic versions. There should be a single checklist or system of lists used by all agency personnel.

Click here for simple checklists developed by IIAT:

The IIABA web-based resource called the Big "I" Virtual Risk Consultant (VRC) powered by Rough Notes offers comprehensive tools to better understand how specific businesses operate and to identify risk exposures with business-specific questionnaires and checklists.

The most comprehensive questionnaires and checklists can be purchased from the International Risk Management Institute (IRMI). On the home page, click on Products and Services, then Products by Topic, then General Risk Management and Insurance.

The Best Practices for Avoiding E&O Claims When Handling Surveys and Checklists

  • Be certain that any checklists you use are up-to-date
  • Include appropriate disclaimer language on all account review documents
  • Document any areas of the insured’s operations that were not reviewed and indicate the specific reason for the omission (e.g. client did not wish to include)
  • Remember that insurance is just one of the risk management tools and other recommendations may be more appropriate for the client
  • Use checklists to make coverage recommendations and document any rejections by the client
  • Develop a written procedure for handling and use of surveys and checklists
  • If you uncover an uninsured exposure and offer to obtain a quote, notify the client in writing that coverage is not bound while you search (See Sample Letter [#3])
  • If you are unable to place coverage for an uninsured exposure, notify the client in writing within 30 days (See Sample Letter [#4])

Agent/Broker of Record Letters

Many times a producer will establish such a strong relationship with a prospect that they are willing to sign a broker of record letter for continued servicing of their account. Unfortunately, this is an area of E&O exposure since it presumes the client’s needs were adequately handled by the prior agent. It is important to thoroughly review all policies taken over on a BOR, since errors may have been made by the prior agent.

Although typically the agency will not earn any commission income until it renews, the same thorough account review must be conducted for these policies as any others in the agency.

The Best Practices For Avoiding E&O Claims When Handling Agent Or Broker Of Record Letters

  • Conduct a thorough review of an account taken on an agency or broker of record letter as on other accounts
  • If the review cannot be conducted immediately, notify the client in writing that coverage already placed has not yet been reviewed for adequacy (see Sample Letter [#1])
  • Set an appointment to meet with the client and review the entire account with 10 days – look for opportunities to cross-sell
  • Develop a written procedure for handling policies secured with an agent or broker of record letter

Proposals and Quotes

Many agencies use a standard proposal format that is part of their agency management system. While these documents are valuable, they also may appear “canned” and too like other agents’ proposals. 
A well-prepared custom proposal that is focused on solutions to client concerns can be a real sales tool for the agency, but also presents E&O concerns.

The Best Practices for Avoiding E&O Claims When Handling Proposals

  • If you need additional information before you can provide a quote or proposal, notify the prospect in writing of what you need and confirm that no coverage is bound (See Sample Letter [#6])
  • If you are unable to find coverage for the prospect or client, notify them in writing (See Sample Letter [#3])
  • Include disclaimer language on any proposal – See E&O Tip [#2]
  • Avoid use of terms like “all risk” or “full coverage” that imply broader coverage than available
  • Provide sufficient detail so the prospect understands what is being proposed
  • Include any necessary steps that must be taken prior to obtaining coverage (supplemental applications, financial statements, loss control recommendations, etc.)
  • Include coverage options and the cost of those options, even if they are estimates
  • Give counsel and advice, but do not make coverage decisions for the client
  • Have the prospect initial any coverages that are rejected
  • Advise customer in writing of coverages that cannot be placed and what the process is for handling in the future
  • If a quote or proposal is not accepted, notify the prospect in writing that no coverage has been placed (See Sample Letter [#5])
  • Prepare an agency standard proposal and a written procedure for handling the presentation
  • Include an expiration date or time limit on all quotes and proposals (See Sample Letter [#2])
  • Develop a written procedure for handling proposals and quotes (See Sample Procedures)