Best Practices for Claims Handling

Nothing will upset a customer more than improper handling of a claim. After all, that’s why they purchased the coverage in the first place. Sometimes the reason they become unhappy is simply that they have limited experience with claims and don’t know what to expect. What might seem perfectly reasonable to us, may seem ridiculous to our clients. When dealing with a client who has a loss, be careful to not set an expectation that cannot be met by your office or the insurance carrier.

The way an agency handles claims is not usually what generates a large number of E&O claims. What does open up an E&O situation is when an insurance company denies a claim for one of the agent’s clients. In addition, when an insurers pays a claim it feels should not have been covered, they may have a cause of action against the agency.

The most important thing an agency can do in handling a client’s claim is to advise them what to expect and when, and to follow up to ensure everything is being handled properly. Never make any commitments about coverage, either that it is provided or is not. This is the carrier’s responsibility and an agent’s interpretation of policy coverage may or may not conform to the carrier’s.

Proceed carefully when asked to give advice about turning in a claim. A late notice to a carrier may result in the denial of a claim and if the policyholder acted on the agents advice, to their detriment, this will no doubt lead to an E&O situation.

In This Section:

Best Practices Ideas for Handling Claims
Case Studies
Sample Letters / Documents / Wording
Sample Procedures


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

  • Advise the policyholder of what to expect, including when they are likely to hear from the insurance company
  • If the insured has any duties under the policy (filing police reports, preserving and protecting property, etc.), let them know since compliance with policy provisions is a condition of coverage (see Case Study #2)
  • Tell the client to contact you if they don’t hear from the company in a certain period of time
  • NEVER confirm or deny coverage—that’s the insurance company’s responsibility (see Case Study #3)
  • Be careful when determining to which carrier or carriers a claim will be reported—if you must later submit a claim to another carrier, they may deny coverage due to late notice (see E&O TIP) (see Case Study #1)
  • Don’t give advice about hiring restoration firms or other vendors unless you are certain the company will provide coverage for such items—get the company’s determination in writing
  • Establish an agency policy to follow up on ALL reported claims within one week
  • If using draft authority, make sure all staff members are thoroughly trained and familiar with the carrier’s guidelines
  • Remember that a loss reported to you, as an agent for the company, is one reported to the carrier
  • In general, avoid giving advice to the client about which losses to report
  • Prepare a written procedure for claim handling (see Sample Procedures)