E&O Weekly Prevention
Strategies for the Professional Agent
  
October 25, 2012

 

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Letter from the Editor

  
This week's edition of AOA E&O Prevention:

 

The Consumer Financial Protection Bureau (CFPB):  Why Professionals Should Beware

 

Here's the good news - many professionals are exempted from the list of covered persons subject to CFPB regulation and supervision.  Here's the not so good news - the CFPB also has authority to interpret and enforce 18 separate federal statutes regardless of whether a person is otherwise exempted.  On December 6-7, 2012, learn about the CFPB's expansive powers and find out what sort of acts will subject a professional to its authority at the DRI Professional Liability Committee's seminar in New York City and earn CLE credits.

 

DRI EVENT

 

 

Table of Contents    

  

California Insurance Agent Who Improperly Completed Insurance Application Liable to Insured

By Donald A. O'Brien, Esq. 

 

By Jill A. Ellman, Esq. 

  

New California Law Targets Frivolous Disability Access Lawsuits

By Mark S. Askanas, Esq. 

 

By Sandy Smith, Esq.

  

Check out this week's edition of World Risk & Insurance News at WRIN.tv. 

 

 

AgentsofAmerica.ORG has partnered with WebCE, a leading nationwide provider of Continuing Education for insurance professionals, to provide you with state-approved self-study CE courses to satisfy your CE requirements online! Check out your CE State Requirements.

  

Also available is our most recent edition of "AOA Tips, Views, News & More," including our new feature "Insurance Resources." & "Recommended Reading".  Remember that membership in AgentsofAmerica.ORG is FREE! Also if you have any thoughts, comments or suggestions, please email me at info@agentsofamerica.org

 

"Bringing the Best Together"

 

Angelo J. Gioia

Publisher


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AOA News, Views, Tips and More

 

E&O Loss Prevention

By Curtis M. Pearsall, E&O consultant of Pearsall Associates, Inc.

 

 

Sales skills and E&O loss prevention - a match made in heaven

 

Some might consider it ironic...some may think it magical. But bottom line, there is actually a strong connection between solid sales skills and E&O loss prevention.

 

In my E&O classes, I will commonly ask "how many ladies diamond rings are insured on a floater in the United States? I probably have asked that question 250 times and in over 99% of the time, the response is some number less than 25%. Why? The normal response is that customers think that they have adequate coverage under a homeowners policy. When is it best to advise customers that "mysterious disappearance" is not covered under a HO policy; before they have a loss or after? Something tells me that the conversation will probably go smoother before the claim as opposed to after it.

 

What's the solution? If every agency wrote to all of their personal lines customers and educated them on the coverage differences, there is a good chance that some of those customers will actually buy a floater. The result - increased sales! If not one customer purchased the floater, has this been a waste of time? Not at all! The letter advising the customer of the coverage differences would certainly strengthen the agent's defense if a problem were to develop down the road.

 

A recent insurance survey indicated that less than 50% of "renters" actually have the proper coverage, liability or property. It was noted that many of the "renters" believe that the landlord's insurance covers their personal belongings. When it is best to educate them - before the claim or after it? With the average renter having approximately $30,000 of personal belongings, a fire could certainly be catastrophic for customers without the proper coverage in place. An agency that takes a proactive position in reaching out to this segment of the market could benefit from increased sales while minimizing the likelihood of their agency facing an E&O claim.

 

Another example: a building owner suffers a fire only to find out their building was not insured to the necessary limit to satisfy the co-insurance clause. As a result, they suffered a co-insurance penalty. Educating your customers on insurance to value and why market value and replacement cost can be worlds apart should result in the proper property limits being secured. The result, increased sales!

 

Actually the opportunities are endless. At your next staff meeting, ask your CSR's and producers what types of questions they are being asked by customers, then develop an education campaign. 

 

Be an agency that educates their customers. Maybe a slogan like "We will make sure you understand the coverage you have and what options are available". By educating the customers, you will be adding an important value to your agency prospects and customers which should no doubt result in new business sales and high retention.

 

Some popular ways to do educate customers:

- Annual account reviews

- Newsletters

- Social Media postings

- Proposals that provide definitions of key insurance terms

- Every time that your agency interacts with that customer, look for cross selling opportunities.

 

Another very effective sales tool that has demonstrated to have a positive sales impact - exposure Analysis Checklists. It is interesting to note that this tool has also been called the closest thing to a silver bullet to prevent E&O claims. A significant part of a producer's role is to determine the needs and expectations of his or her prospects and clients. Said another way, their goal is to help their client / prospect conserve assets and reduce the adverse effects of risk. Exposure Analysis Checklists such as the Rough Notes Producer Online product or the Vertafore Producer Plus product are great tools that should be in every sales person's toolbox. They provide a tremendous amount of information on over 650 different classes of business and the various lines of business pertinent for that class. The detail within these checklists is remarkable and they greatly enhance an agent's knowledge of the specific class of business. In addition, checklists provide details regarding the exposures that a particular type of business presents.

 

The checklists also provide questionnaires detailing the key questions to ask that will ensure a solid understanding of the various exposures. Including these questionnaires with the carrier submission help the underwriter better understand the risk. Providing your carriers with full and unbiased information is a great means to avoid E&O issues down the road.

 

For agencies that are truly serious about growing their agency, take the initiative to educate your customers and to sharpen the sales skills of the staff, both internal account execs and outside producers. By combining education and sales training, not only will your agency benefit from increased sales but you will also significantly reduce the potential of an E&O claim. At the end of the day, sales skills and E&O loss prevention is truly a match made in heaven.

 

For additional information, contact Curt curtis@pearsallassociates.com or 315-768-1534


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Insurance Coverage Tip

By Alison Slezak of Martin & Company

 

New Kidnap, Ransom & Extortion Product

 

Security related issues such as kidnapping, ransom and extortion pose a threat to practically every company no matter their size or industry.  The potential for these types of risks fluctuates greatly around the world, depending on political unrest, economic climate, local law enforcement, terrorism activity among numerous other variable factors. 

 

CNA introduced a new Kidnap, Ransom and Extortion Insurance Program to address these types of issues that may arise.  Coverage features include workplace violence business interruption loss, threat response, expatriate evacuation & repatriation expenses, standard & alternate business interruption loss, kidnap, disappearance, hostage crisis, assault expense, computer virus business interruption loss, child abduction and travel evacuation.

 

Private & Public companies, as well as Non-Profit & Governmental Agencies are all eligible for this coverage.  The basic rates charged are primarily dependent on the revenues or assets, risk levels of the insured person and total number of employees.  Coverage limits are available up to $25 million. 

 

To view more "hot trends" in the Property & Casualty Insurance Marketplace, visit:

Martin & Company's Market Trends & Updates  or contact Alison at aslezak@martincompanyus.com

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Tip- For Competing in this Changing and Competive Marketplace

By Philip W. Eide of BenefitPlace.biz and BPTradeShow.com

 

Carefully Crafted Affiliations Can Help Retain Clients While Opening New Doors and Creating New Revenue Streams for Brokers and Agents

 

While the Insurance and Benefits Industries have always been highly competitive, there are a number of new factors making it more and more difficult to retain existing Clients and to add new Clients.  These include:

 

A shift from traditional "Outbound" marketing models to "Inbound" marketing strategies -  including "Internet Based" Brokers.

Reduced Commissions from Health Insurers and other lines - whether or not related to Medical Loss Ratios (MLR).

Most Employee Benefits have become "Voluntary" requiring Education, Communication, Enrollment and Data Management.

Greater demand by Insurers and Employers for added Services that produce no Revenues.

Competition from traditional service providers who have become "Brokers", ie. ADP and Paychex soliciting and getting "Agent of Record" letters by discounting their Payroll and other Services.  Note - This not considered "Rebating"!

While the above may appear to be creating the "Perfect Storm" washing Brokers and Agents away, it can also be viewed as an opportunity to "Ride A New Wave"!

 

It is time for various non-competitive "Sectors" of the Insurance and Benefits Industries to: Unite, Affiliate, Provide Expanded Services, and Better Compete.  We suggest that Brokers and Agents aggressively structure carefully crafted "affiliations".  The affiliations could include the following Sectors:

 

A Traditional Broker/Agent for Core Benefits, ie. Health, Dental, Vision, etc.

A Voluntary/Worksite Benefit Specialist offering Supplemental Plans, Programs, and Services. 

A Property & Casualty (P&C) Broker.

An Enrollment Company or Service.

A Payroll Service Provider or System.

A Third Party Administrator (TPA) specializing in Flex Plans and Self Funded Plan Administration.

 

In the past the the above Sectors generally worked independently. The Business Owners/Employers were solicited by each Sector separately.  The Business Owners/Employers contracted separately for each Plan, Program and/or Service.  While these individual practices will continue, many Business Owners/Employers would appreciate an opportunity to bundle the Plans, Programs, and Services when offered by competent professionals.

 

When creating these affiliations, consider the following:

 

Affiliates should first build trust with the other Affiliates!

Affiliates should be dedicated to contributing to the success of the affiliation!

Each Affiliate should agree to contact a fixed number of existing Clients to approach on behalf of the affiliation and include the other Affiliates in the meetings as appropriate!

Affiliates should not be asked to shift away from their existing marketing models or sacrifice existing revenues!

The affiliation should have an "Engagement Period" before getting "Married".  Test the water!

Affiliates should have an understanding that the Business Owners/Employees may not need the entire package offered by the Affiliates.  Affiliates will be included per the needs and desires of the Business Owners/Employers!

Each Affiliate should be party to a "Held Harmless" clause for the other Affiliates' activities!

Affiliates should agree to jointly develop "Marketing Tools" to present to the Business Owners/Employers delineating the advantages of the bundled or unbundled Plan, Programs, and/or Services!

Affiliates should present a consistent message as to the "Value Proposition" the affiliation brings to the Business Owner/Employer.

Affiliates should create a model for distribution of net revenues derived on a case-by-case basis!  An example of a successful model was based on the distribution of net revenues by the role played by the specific Affiliates.  The distribution of revenues was based on percentages allocated by:

The Affiliate who brings the Qualified Prospect to the table.  In many cases this would be one of the Affiliate's existing Clients.   Note - When an existing Client is exposed to the other Affiliates, the Affiliate should not be asked to share in the existing revenues derived from that Client.

The Affiliate(s) who "Close" on the Qualified Prospect and make the sale on behalf of the affiliation for the Plans, Programs, and/or Services.

The Affiliate(s) who implement the Plans, Programs and/or Services.

The Affiliate(s) who provide ongoing required Services.  

Regular meetings should be scheduled - in person or by conference call - to discuss  problems and concerns, discuss marketing, and to refine the initiatives.

Each Affiliate should be dedicated to making the affiliated group Financially Successful!

 

Properly structured and maintained, the affiliations as described above will:

Give the individual Affiliates a competitive edge!

Help to Retain existing Clients for the Affiliates!

Provide a Marketing Advantage to the Affiliates for Attracting New Clients

Provide a "Value-Added" Service to Business Owners/Employers.

 

For Brokers and Agents to survive the current and future marketplace changes, aggressive actions will be required to create "Safe Harbors".  Competitors, old and new, are moving quickly to capture a finite number of potential Clients.  They may be targeting yours!

 

For additional information - Contact Phil at max@benefitplace.biz - Visit www.benefitplace.biz or Call 216.577.5579.  Our Goal is to Shorten Selling Cycles, Reduce Marketing Costs, and Increase Revenues for the Insurance and Benefits Industries!  

Articles 

A1California Insurance Agent Who Improperly Completed Insurance Application Liable to Insured                                                   

By Donald A. O'Brien, Esq. of Hinshaw & Culbertson LLP

 

Defendant construction company hired an insurance agent to procure a commercial general liability insurance policy. The insurance agent prepared the application for the signature of the construction company's president. The agent checked the boxes on the application before it was ever sent to the insured for review. Information in the application on prior claims or threatened lawsuits was erroneous at the time it was sent to the insurance company. The agent also failed to explain key terms on claims, including whether "defective workmanship" that was to be disclosed included warranty and/or punch-list work. Plaintiff insurance company issued a policy and after claims were brought against the construction company for construction defects, the insurance company sued to rescind the policy, alleging that there were material omissions and/or misrepresentations in the application. The construction company brought a cross-claim against the insurance agent alleging claims for breach of contract and negligence in preparing the insurance application. The U.S. District Court for the Northern District of California denied the insurance agent's motion to dismiss the cross-claim for failure to state causes of action under both theories. 

 

  

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By Mark S. Askanas, Esq. of Jackson Lewis LLP

 

California Governor Jerry Brown has signed into law a bi-partisan measure that seeks to curb rampant, frivolous Americans with Disabilities Act access lawsuits in the state and expand access to businesses for those with disabilities. This is good news for California businesses. The state reportedly has 12 percent of the country's disabled population, but 40 percent of the nation's ADA lawsuits.

 
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By Sandy Smith, Esq. of Wilson Elser Moskowitz Edelman & Dicker LLP

  

The National Association of Insurance Commissioners (NAIC) amended its Model Regulation regarding Annuity Disclosure last fall. While to date only one state has enacted the amendments, it is anticipated that states will begin to propose legislation to adopt these amendments in their upcoming legislative sessions. It is important for insurers to understand these new disclosure requirements so that they and their agents can be prepared to comply with the mandates. Additionally, it is essential for insurers to develop comprehensive annuity "point of sale" procedures, given the already enacted suitability and senior-specific certifications regulations and the inclusion of the concepts found in the Annuity Disclosure Model Regulation in the Market Regulation Handbook used by regulators in conducting state examinations of insurers. 

 
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This newsletter is produced in conjunction with Agents of America, www.agentsofamerica.org. The contents of which may not be reproduced without the express written permission of Agents of America. Copyright 2012