Why Worry About E&O Loss Control?

In this section:

Why Worry About E&O Loss Control?
What is a “Best Practices” Approach?
What Makes This Guide Different From the Rest?

Why Worry About E&O Loss Control?

At a time when independent insurance agents are being asked to become true sales organizations and provide increasingly high levels of customer service to meet consumer demand, trends in professional liability cause them to become more vigilant regarding errors and omissions loss prevention.

In order to minimize E&O loss exposures, and still operate their businesses at the highest level of performance, agencies must achieve an exquisite balance between concern for losses to the agency itself and satisfying the needs of an insurance-buying public who is at times both better informed and sorely lacking in the technical expertise to handle their own insurance matters without expert advice. Failure to achieve this balance could result in financial ruin, either from increasing costs of professional liability insurance, increased claims activity or deductible levels, or by simply crippling the agency’s sales and customer service efforts out of fear of E&O claims.

How can an agency address its Errors and Omissions concerns while simultaneously maintaining the highest levels of customer satisfaction and growth? The answer is to adopt a Best Practices approach to E&O loss prevention.

This guide is designed to provide agents and brokers with the practical tools they will need to move their agency forward while utilizing sound loss control with respect to E&O exposures.

What is a "Best Practices" Approach?

For many years, independent agents had limited resources when it came to managing their agencies. Although they were bombarded with data and seemingly meaningful statistics, agency owners were forced to manage to the information that was available. That information, unfortunately, consisted of nothing more than averages of agency results nationwide. What’s wrong with averages? Well, they’re just that…average. If you used the previously compiled statistics to run your agency, you were aspiring to mediocrity. Imagine a child sitting in a class room thinking “If only I could get a C”!

That all changed in 1993 when the Independent Insurance Agents of America unveiled its groundbreaking Best Practices Study. Rather than survey thousands of agencies across the country and determine what an “average” agency looked like, IIAA sought out only the cream of the crop, the best of the best, the “Top Guns” among independent agencies nationwide.

The results of that study have given us a new target at which to aim. If we study the best performing agencies, discover where we are currently operating, and formulate a plan to close any gaps that exist between our performance and theirs, we can make great strides toward being extraordinary, not merely average.

This approach is useful in all areas of agency management, including Errors and Omissions loss prevention. In conducting the Best Practices study, along with its periodic updates, IIAA was able to determine what these agencies were doing in terms of E&O loss prevention. The results of that study have been incorporated into this guide, to help establish a standard for E&O loss prevention that is far higher than that previously determined.

One thing really separates the Best Practices agencies from the rest—an unshakable commitment to providing outstanding customer service that will produce higher profit levels for the agency, greater customer satisfaction, and reduced E&O claims. A focus on sound management practices has the benefit of improving agency performance in many areas, not just E&O.

What Makes This Guide Different From the Rest?

In addition to adopting the best-in-class technique of agency management, this guide is fundamentally different from other Errors and Omissions Loss Prevention guides in other ways.

This guide is designed to emphasize the positive aspects of adopting a best-in-class approach to agency management. The focus will be on practical, real-world solutions and best practices that can be implemented in any agency. There will be no scare tactics, threats, or intimidation. When an agency operates in utter fear of E&O claims, it tends to experience paralysis and fails to provide the highest levels of customer service. This creates a “Catch-22” that only leads to more E&O losses.

The focus of this guide is on results. Unless behavioral changes are made in the agency, E&O results will remain the same.The objective of this guide is to change attitudes and habits.

Case Study Method

The guide will involve the extensive use of actual closed E&O cases. By analyzing E&O losses that have affected other agencies, we can learn what steps could have been taken to prevent the claim or, if the claim was likely to be presented no matter what, what might have been done differently to provide better documentation for the agency’s E&O carrier to secure a positive outcome. A focus on real-life situations is important in order to avoid an attitude that “it can never happen to us”.

Tools

This guide includes a number of forms, checklists, and sample letters that can be used within the agency.

Detailed procedures will be presented. When implemented, these procedures may result in decreased E&O losses. A sample of written procedures is also included in the materials. These procedures must be customized to fit your agency, but the samples should serve as a starting point for the establishment of your agency’s procedural manual.

Implementation of procedures is only one part of an effective E&O loss control program, and the tools provided in this seminar are merely examples and do not guarantee that the intended result will be achieved.

Included among the tools are self-audits. These will help you develop an action plan for implementation of procedures that focus on current weak areas as revealed by the self-audits.

For losses that do occur, the guide will provide specific claim handling procedures.

Emphasis on Technology and Automation

Most agencies have come a long way on the automation highway, and while this has resulted in increased efficiencies and improved productivity, it also means a new approach to E&O loss prevention. Portions of this guide will focus on what highly automated agencies do to document procedures and maintain a highly credible source of information within the agency.

Current Issues

Our clients’ needs are certainly not getting less complex. In fact, there has probably never been a time when independent agents and their expertise have been more needed by insurance consumers. The guide will review some of the current issues in the industry and in agency management that can impact E&O claims.

Risk Management Approach

Like the cobbler’s child who has no shoes, the independent agency is often so focused on using sound risk management principles with their customers that they forget the same concepts apply to their agency. This guide will take a risk management approach to E&O by identifying exposures, analyzing and measuring those exposures, deciding on an appropriate method to treat the risk, and implementing the chosen method. Again, implementation is key. If we continue to focus on identification without making necessary changes, we are doomed to repeat the past. As the E&O climate worsens, doing nothing can prove fatal.