As we begin another year, it’s a good time to reflect on what you need to do to be more successful and to reduce the likelihood of an errors and omissions claim being presented against your agency.

While E&O frequency has been down for the last number of years, there are many reasons to suggest that E&O claims frequency is going to rise — by taking some key steps now, you can protect yourself more effectively. One of the primary indicators for an increase in claims frequency is the deterioration in carrier results during this soft market. Some recent feedback from industry groups seems to suggest that when the final profit numbers are in for 2009, they will not be pretty.  As carriers review and address these results, many carriers may be taking some significant underwriting / rate actions. How your agency deals with these actions is a key.

Here is one area that if discussed openly and implemented effectively could make a noticeable difference.

At the next staff meeting, dedicate some time to discuss E&O. In specifics, discuss with each of the staff what they think their E&O exposure in the agency is. For some of the staff, this is going to be very easy. There is no doubt that CSR’s and producers generally know and understand their role and the exposure associated with it. How about receptionists and claims staff? They may not totally understand that what they do (or in some cases, didn’t do) can result in an E&O claim against the agency.

For example:

• A direct bill client comes into the agency and proceeds to give the receptionist money for their auto coverage.  Seems fairly harmless. But what if the policy was cancelled yesterday? By the receptionist taking the premium the client could argue that they assumed that everything was taken care of and that coverage was in effect.
• Or an agency claims person not sending a claim in to the carrier, assuming it wasn’t covered, only to find out that it would have been covered.
• Or what happens when you send a claim in late… potentially a disclaimer for late notice? This is not as farfetched as it may sound because unfortunately, it is occurring more and more.

For each of the staff, it would be beneficial to ask them to identify a list of activities (at least five) that they could do in 2010 that has the potential to reduce their E&O claims potential and at the same time, improve their work product / efficiency.

Here are some possibilitiese to consider:

Receptionist – Based on the example provided, it may be prudent to request that the CSR that handles that specific account meet with the client before any monies are exchanged. Another possible improvement could be that when a client calls to request a change in their coverage, the receptionist makes it very clear that the client needs to speak with the producer or CSR for that change to be effective.

Customer Service Representative / Account Executives – The areas here are numerous as the activity / workloads are heavy. Maybe a commitment to improve account rounding to ensure that clients are aware of gaps and have the opportunity to secure coverage to address those gaps. Or a greater focus on the issues involving Excess and Surplus Lines and the importance of binding coverage prior to the effective date, or to ensure that renewal policies from E&S carriers are checked against the expiring coverage to identify any changes. Certainly the issue of dealing with certificates warrants some involved discussion.

Producers – This is a key area where a strong commitment can pay big dividends. Do you know what you sell and sell what you know? If not, take the time to educate yourself on the exposures of your clients. They are relying on you for your expertise and knowledge – be up to the challenge. The various Exposure Analysis Programs (through AMS / Rough Notes, etc.) are excellent resources (go to uticanational.com for more information on these).

Claims – Do you have staff that will make that “judgment call” as to whether there is coverage or not? What if you did not promptly handle that claim on behalf of your client? Could they suffer additional loss by your lack of attention?

Marketing – A key area that can position your agency extremely well in your community. Develop a newsletter that explains policy coverages / limitations / exclusions, etc. For example, a recent article in an insurance periodical stated that 75% of the women’s diamond rings in the U.S. were not insured. Why? Do clients think that the contents section of the Homeowners policy adequately covers them? What if the stone comes out and is lost?  There is no coverage unless it is specifically scheduled under some type of inland marine coverage.

Don’t be afraid to discuss E&O with the staff. Let them know the major role they play in ensuring the future success (production and profitability) through solid E&O loss control activities. Good luck, and let’s all have a great 2010. (It seems like only yesterday we were worried about Y2K).

Curtis M. Pearsall is a special consultant to the Utica National E&O Program and can be reached at cmp53@verizon.net.