In most states, the legal standard of an insurance agent has been characterized as essentially that of an “order taker”. Generally, an insured must make a specific request for a particular type of insurance coverage in order to impose a duty on the agent to procure that particular coverage. Absent to an agreement to the contrary, an agent has no duty beyond what he or she has specifically undertaken to perform on behalf of the client. It is important to note that the typical agency standard does require that the agent inform their client if they cannot obtain the requested coverage.
First off, I wonder how much insurance an agency would sell if they basically waited for the customer to contact the agency. This may depend on how well your customers know the coverage that they have (and how it works) and what coverage options are available. Are your customers aware of umbrella coverage? Do they know the limitations in the homeowner’s policy for their jewelry, etc.? Do they understand the value of uninsured / underinsured coverage on their auto policy? These are just a few of the coverage options worthy of discussion / communication / education with your customers. In addition, there is certainly the possibility that the customers exposures could change from the time that the coverage was first written.
Put yourself in your client’s position. You have your homeowners insurance with the agency (this is the only coverage with the agency). After a couple of years, you buy a dog for your kids. The dog subsequently bites a neighbor’s kid and you are now facing a lawsuit asking for substantial damages. The only coverage you have is the $300,000 liability portion of the HO policy. This is the exact scenario of a recent E&O claim against the agency. The agency customer is arguing that after the policy was initially written, they never heard from the agency; they would just get their policy in the mail. If they were advised of umbrella coverage, they would have purchased it.
This issue could have easily avoided if the agency had undertaken a cross selling campaign. Some approaches to consider:
– Use your agency management system to identify issues such those accounts that you have the HO but no auto (or vice versa) or you have the auto and HO but no umbrella. Contact these customers(having it in writing is a plus) bringing to their attention the specific subject / issue. Include in the letter some education of the subject and why securing the additional coverage is important (claim examples are a great way to make the point).
– When customers call in, make it easy for the CSR to identify what coverages the customer has and what they don’t. This is a great time to bring these additional coverages to their attention.
– In both of these scenarios, if a customer rejects the coverage you are discussing, document / document / document. This documentation should not only be in the file / system but also with an e-mail back the customer officially noting their decision.
In addition, make it a point to touch base with your customers (annually is suggested) to determine whether there has been any change in their exposures and then act on what you are advised. Including an exposure checklist is recommended. These additional “touches” will certainly aid in the defense of the agency if an uninsured loss occurs but you will no doubt also find your agency selling more insurance.