Katrina, Sandy and Harvey – What Have We Learned and What Can We Do Better? (Conclusion)
Katrina, Sandy and Harvey – What Have We Learned and What Can We Do Better? (Conclusion)06.01.2018
As we enter into hurricane season, I am concluding my discussion of the last two months looking at lessons learned from E&O claims that followed Hurricanes Katrina and Superstorm Sandy and how the insurance community responded to Hurricane Harvey. This month, I turn my attention to managing client expectations and client communication standards with the goal of reducing the likelihood of such claims in the future and enhancing the prospect of a successful defense as to those claims that are made.
The reality is that most E&O claims feature an upset client, and this is magnified following a natural disaster with heightened emotions and multi-faceted concerns. You may be facing similar issues complicating the nature of client interactions since an insurance agent lives and works where his or her client does. To create an environment where an insurance agent can operate as effectively as possible at the time of a catastrophe, client education that begins with the first meeting and continues throughout the relationship is critical. All too often, an insurance agent will mistakenly overestimate a client’s knowledge of the service he or she will provide, not to mention the terms and conditions of the insurance policy at issue, and these assumptions can unnecessarily lead to an E&O claim. The bottom line is that is that the more your client knows about the policy procurement and claim process and what to expect, the less likely that an E&O claim will be made when a problem arises.
Client education standards and corresponding communications takes many forms, from meetings to phone calls and voicemails to emails and texts, each one in today’s world of being too quick, too easy and too casual. Whatever form, such communications need to be early (timely) and often with respect to each transaction since “radio silence” often leads a client to question what is going on. Moreover, given the legal impact of communications regardless of the form, just as the three important words in real estate is “location, location, location”, the three paramount communication words are “document, document, document”. This takes likeability, popularity and questions of credibility out of the equation bearing in mind that anything not in writing or not transmitted is subject to dispute.
These standards need to be adopted within all facets of your agency operations. For example, there need to be procedures for placing, tracking and checking new and renewal business. Who is responsible for getting an application to a carrier? Who follows up if a policy is not received timely? Who checks the coverage to make sure it matches what was requested? Are all these efforts documented contemporaneously and/or are you keeping the client up to date on your efforts? Some common mistakes seen in the procurement and renewal process that typically lead to E&O claims include insurance agents that overstate policy coverages and/or practice policy coverage outside their area of expertise at the time of a sale or procurement, and an insurance agent failing to inform clients of policy changes at renewal.
Similarly, procedures need to be in place when it comes to processing a claim for a client. While timely submitting all claims to a carrier (and to the correct carrier) seems simple enough, too many agents make coverage determinations on a carrier’s behalf or make a business decision for a client about the impact of submitting a claim (such as is it worth if given a deductible or the impact of submitting a claim will have on future insurability or premiums). I am not suggesting these are not legitimate questions or issues to raise with a client, but the ultimate decision rests with the carrier and the client, respectively, and any decision needs to be confirmed in writing just like an insurance agent would (hopefully) document whether coverage is being accepted or rejected.
Finally, I’ve conducted numerous seminars where the prime focus of questions is what to do when a client is upset, or claims you did something wrong. My central theme in response is be proactive and do not operate like you are stuck in quicksand. Within that framework, it is critical to not ignore communications from a client, do not be defensive, and do not admit liability. (Besides the impact of admitting you did something wrong will have in leading to a claim, admitting could jeopardize your E&O coverage for violating a policy condition.) In the end, when subject to an upset client, or a complaint, it is important to remember you are not alone and, when faced with a complaint, you should escalate a complaint, potential claim, or scenario where you think you may have done something wrong within your agency as well as, if appropriate, to your E&O carrier.