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Agency Operations. Learning Objectives. We will review the learning objectives at the beginning of the section in which they are found. Section 1: The Insurance Agency. The Insurance Agency.

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learning objectives
Learning Objectives
  • We will review the learning objectives at the beginning of the section in which they are found
the insurance agency
The Insurance Agency
  • Explain the different factors that affect how an agency distributes its products and provides customer service
  • Differentiate between an agent and a broker
  • Explain the standard of care an agent owes to its insurance companies
  • Explain the standard of care an agent owes to its customers
  • Identify the potential stakeholders of the insurance agency
the insurance agency1
The Insurance Agency
  • The Primary Function of An Insurance Agency is to Sell Insurance Coverage and Provide Other Fee-Based Services
  • Primarily A Sales Oriented Business
  • But Service Driven as Well
slide6

The Insurance Agency

LO

  • Distribution is Affected By:
    • Number of Employees
    • Single or Multiple Locations
    • Local, Regional or National or International Operations
    • Area(s) of Specialization (if any)
    • Agency Management System(s) Used
    • Use of Service Centers
the insurance agency2
The Insurance Agency
  • Sources of Income/Revenue
    • Commission
      • New and Renewal
      • Personal Lines, Commercial Lines, Life, Health & Disability, Employee Benefits
    • Fee-Based Services
    • Profit Sharing Bonuses
    • Investment Income
the insurance agency3
The Insurance Agency
  • Overview of Positions Within the Agency
    • Producer/Agent
    • Broker
    • Customer Service Representative
    • Other
the insurance agency4
The Insurance Agency

LO

  • Positions Within the Agency
    • Producer/Agent
      • Required to have a license, issued by the department of insurance, which authorizes the agent to transact insurance
      • Identifying prospects, making sales calls, presenting solutions, securing the buying decision, collecting premium, and binding of coverage
the insurance agency5
The Insurance Agency

LO

  • Producer/Agent
    • Acts on behalf of the insurance company
    • What the agent knows, the company knows
the insurance agency6
The Insurance Agency

LO

  • Positions Within the Agency
    • Broker
      • Required to have a broker’s license issued by the department of insurance 
      • Many of the responsibilities are identical to those of an agent except a broker does not usually have binding authority
      • A broker acts on behalf of the buyer/customer
the insurance agency7
The Insurance Agency
  • Positions Within the Agency
    • CSR
      • Customer Service Agent (CSA), Account Representative, Account Executive or Account Manager
      • Responsible for providing information, advice, and service to customers during and after the insurance transaction
      • Responsible for the day-to-day operation of an agency
the insurance agency8
The Insurance Agency
  • CSR
    • Responsibilities may also include sales such as cross-selling and account rounding
    • May be required to be licensed as an agent (or producer) as duties frequently fall under “transacting” insurance
    • Size of the agency will dictate level of responsibility and specialization
the insurance agency9
The Insurance Agency
  • Positions Within the Agency
    • Other
      • Accounting
      • Administration/Management
      • Claims
      • Loss control
      • Risk management
licensing requirements
Licensing Requirements
  • Agent/Producer
    • Resident
      • License to transact insurance in the state where the agent resides
    • Non-resident
      • License to transact insurance in a state or jurisdiction in addition to the one in which the agent lives
licensing requirements1
Licensing Requirements
  • Agent/Producer
    • Prelicense Education
      • Education that must be completed before a person can take the agent’s examination
    • Continuing Education
      • Education that must be completed in order to renew an agent’s license
the insurance agency10
The Insurance Agency

LO

  • Standard of Care Owed To Insurance Companies
    • Loyalty
    • Good Faith
    • Reasonable Care
    • Contractual Duties
the insurance agency11
The Insurance Agency

LO

  • Standard of Care Owed To Customers
    • Adequate Coverage
    • Proper Coverage
    • Coverage Placed in Their Best Interest
    • Prompt Communication
    • Coverage Placed With a Financially Sound Insurance Company
resources
Resources
  • The National Alliance
  • IRMI
  • Insurance Journal
  • Agent and Broker
  • Rough Notes
  • National Underwriter Company
  • National Association of Ins. Commissioners
  • National Association of Insurance Women

Knowledge

Is

Power

stakeholder
Stakeholder

People who have the potential to be affected by

any action taken by an organization.

Any group or individual who is affected by

achievement of a firm's objectives

stakeholders
Stakeholders

LO

  • Agency Owners
  • Board of Directors
  • Managers and Employees
  • Customers
  • Insurers
  • Vendors
  • Government
  • Industry Associations
learning objectives1
Learning Objectives
  • Explain the regulation of insurance companies
  • Explain the differences between admitted and non-admitted insurance companies
  • Explain the characteristics of an excess and surplus lines agent/broker
learning objectives2
Learning Objectives

4. Explain the importance of the financial status of a company

5. Explain the differences between treaty and facultative reinsurance and the importance of reinsurance to the agency

6. Identify and describe the other markets including Lloyd’s of London, excess and surplus lines, and government programs/pools

the insurance marketplace
The Insurance Marketplace

LO

  • Insurance Companies
    • Regulated at state level by Insurance Commissioner, Director of Insurance, etc.
    • The primary purpose of regulation is to protect the consumer
the insurance marketplace1
The Insurance Marketplace
  • How Insurance Companies Are Formed
    • Stock company
      • Owned by the stockholders
      • Objective is profit for the stockholders
    • Mutual Company
      • Owned by the policyholders
      • Goal is to provide insurance at or near the actual cost of doing business
the insurance marketplace2
The Insurance Marketplace

LO

  • Admitted
    • Authorized and licensed to do business in the state
the insurance marketplace3
The Insurance Marketplace

LO

  • Non-admitted
    • Accessed through excess or surplus lines broker
    • Coverage cannot be placed with a non-admitted carrier unless a due diligence effort has been made to place coverage in an admitted market
    • Not protected by the Guaranty Fund
the insurance marketplace4
The Insurance Marketplace

LO

  • Non-admitted is not business as usual
    • Binding authority
    • Minimum premium
    • Minimum earned premium
    • One-way audits
    • Non-standard forms
the insurance marketplace5
The Insurance Marketplace

LO

  • Excess & Surplus Lines Agent/Broker
    • Places coverage with non-admitted insurer on behalf of the agent
    • Appointed by non-admitted insurer to
      • Solicit sales from agencies
      • Write insurance
      • Collect premium
      • Collect surplus premium taxes
the insurance marketplace6
The Insurance Marketplace

LO

  • Excess & Surplus Lines Agent/Broker
    • Monitors the financial condition of the insurance company (Insurance Departments have that responsibility for admitted companies)
    • Does not usually have binding authority
the insurance marketplace7
The Insurance Marketplace
  • Regional or National
    • Where does the insurance company do business?
    • Are they familiar with the issues specific to your geographic area?
the insurance marketplace8
The Insurance Marketplace

LO

  • Financial Rating
    • Important to monitor so that the consumer is not negatively affected by the company’s inability to meet its financial obligations such as paying claims and returning unearned premiums
    • Financial data is filed with the state insurance departments annually
the insurance marketplace9
The Insurance Marketplace

LO

  • Financial Rating
    • Rating organizations can also provide financial information about an insurance company
    • Resources
      • A.M. Best
      • Dun & Bradstreet
      • Standard & Poors
      • NAIC
the insurance marketplace10
The Insurance Marketplace

LO

  • Reinsurance Company
    • The insurance company’s “insurance company”

Reinsurance

A process involving

the transfer of risk

from one insurer to

another insurer

the insurance marketplace11
The Insurance Marketplace

LO

  • Reinsurance Company
    • Treaty Reinsurance
      • The ceding company agrees to cede certain classes of business to the reinsurer as described in the treaty
      • The reinsurer agrees to accept ALL business qualifying under the treaty
treaty reinsurance example
Treaty Reinsurance Example
  • ABC Insurance Company has a treaty with XYZ Reinsurance Company
  • According to their treaty, ABC is required to “cede” to XYZ (reinsure) liability limits over and above $1,000,000 on every personal auto policy ABC writes. ABC pays a portion of the premium to XYZ for this transfer of risk.
the insurance marketplace12
The Insurance Marketplace

LO

  • Reinsurance Company
    • Facultative Reinsurance
      • Each exposure that the ceding company wants to reinsure is offered to the reinsurer on an individual basis
      • It is individually underwritten and individually priced
the insurance marketplace13
The Insurance Marketplace

LO

  • Importance of Reinsurance to the Agency
    • The treaty an insurance company has with its reinsurer is a factor that must be considered when an underwriter is evaluating a risk for acceptance and pricing.
the insurance marketplace14
The Insurance Marketplace

LO

  • Importance of Reinsurance to the Agency
    • Personal lines can be affected by the limitations (coverage limits, values in unprotected locations, etc.) as the insurance company may be unable to provide coverage because reinsurance would not be in place. Reinsurance may be the reason for the limitation of binding authority.
the insurance marketplace15
The Insurance Marketplace

LO

  • Importance of Reinsurance to the Agency
    • Commercial lines can be affected by both coverage limitations and pricing. If reinsurance is required on a risk that falls outside of the scope of the treaty, pricing and coverage availability can be affected. The underwriter must include a premium charge for the reinsurance.
the insurance marketplace16
The Insurance Marketplace

LO

  • Lloyd’s of London
    • Market for difficult to insure risks as well as unique or unusual risks
    • How it works
the insurance marketplace17
The Insurance Marketplace

LO

  • Managing General Agent (MGA)
    • Wholesale intermediary
    • Represents one or more insurers
    • Accepts business on behalf of his/her principal within mutually agreed guidelines
    • Authority to appoint retail agents within a specific geographic area
slide44

Insurer A

Insurer C

Insurer B

Managing General Agent

Agencies

Insureds

the insurance marketplace18
The Insurance Marketplace

LO

  • Government Ins. Programs/Pools
    • Private sector may avoid writing risks that fall outside of their underwriting criteria or are catastrophic in nature
    • In response, the government may establish insurance programs or pools as a way to make insurance available
the insurance marketplace19
The Insurance Marketplace

—Caution—

Agents do not typically have binding authority for Government Insurance Programs and Pools

Important to understand underwriting criteria, binding authority (if any), and problems associated with incomplete or incorrect applications

the insurance marketplace20
The Insurance Marketplace

LO

  • Auto Assigned Risk
  • Fair Access to Ins.Requirements (FAIR)
  • Wind & Hail Pools
  • National Flood Insurance Program
  • Workers’ Compensation Assigned Risk
  • Federal Crop Insurance (FCIC)
learning objectives3
Learning Objectives
  • Identify and explain the five steps in the risk management process
  • Identify and describe the four major classes of exposure
  • Identify and describe the methods used to identify exposure to loss
  • Given a specific situation, determine the risk control technique to apply
risk management
Risk Management

The purpose of risk management

is to protect the

customer’s assets

through the identification

and analysis of exposures,

controlling the exposures,

financing of losses

with internal and/or external funds,

and the implementation

and monitoring of the risk management process.

risk management1
Risk Management

LO

5-Steps

  • Risk Identification
  • Risk Analysis
  • Risk Control
  • Risk Finance
  • Risk Administration
risk management2
Risk Management

The most important step is identification because an unknown exposure is unable to be analyzed, controlled or financed.

risk management3
Risk Management

LO

Major Classes of Exposure to Loss

  • Property
    • Buildings, homes, personal property, business property, equipment, intellectual property, etc.
risk management4
Risk Management

LO

Major Classes of Exposure to Loss

  • Liability
    • Bodily injury, property damage, personal injury, hold harmless agreements, etc.
risk management5
Risk Management

LO

Major Classes of Exposure to Loss

  • Loss of Income/Loss of Use
    • Loss of use from dependent properties, extra expense, loss of rental value, additional living expenses, etc.
risk management6
Risk Management

LO

Major Classes of Exposure to Loss

  • Human Exposure
    • Disability, long-term care, life insurance, key person, employee benefits, employment practices, etc.
risk management identification
Risk Management: Identification

LO

  • Interview
  • Checklist, Survey or Questionnaire
  • Physical Inspection
  • Activity Analysis
  • Advertising/Website
  • Document Review
  • Other
    • Flowchart
    • Loss History
    • Financial Statements
risk management analysis
Risk Management: Analysis
  • Measuring Exposure to Loss
  • Frequency
    • How often
  • Severity
    • How much?
  • Points to Remember
risk management control
Risk Management: Control

LO

  • Avoidance
    • Don’t own certain property or engage in an activity
  • Loss Prevention
    • Reduces frequency
  • Loss Reduction
    • Reduces severity
risk management control1
Risk Management: Control

LO

  • Duplication/Separation
    • Reduces severity
  • Combination
    • Using more than one risk control technique
risk management finance
Risk Management: Finance

Retention

Or

Transfer

risk management finance1
Risk Management: Finance
  • Active Retention
    • Customer knows
  • Passive Retention
    • Customer doesn’t know until after the loss
  • Insurance Transfer
  • Non-insurance Transfer
    • Contractual such as hold harmless
risk management administration
Risk Management: Administration
  • Monitor
  • Make Changes When Needed

POD

learning objectives4
Learning Objectives
  • Identify and explain the three communication skill areas: Listening, Oral and Written
  • Identify and explain the 3-step process in proofing written communication
communication skills
Communication Skills
  • Critical component of agency-customer relationship
  • Methods
    • Face-to-face
    • Telephone
    • Written correspondence
communication skills1
Communication Skills

LO

  • Two-way communication is the most effective way to get your message across
two way communication
Two-Way Communication

Message Spoken

Message

Re-delivered

Message

Received

Clarification

Response

Interpretation

communication skills2
Communication Skills

LO

  • Verbal vs. Non-verbal
    • Face-to-Face
      • 55 percent of what the listener “hears” is determined by the speaker’s body language
      • 38 percent from tone of voice
      • 7 percent from words actually spoken
communication skills3
Communication Skills

LO

  • Verbal vs. Non-verbal
    • Telephone Communication
      • 86 percent of what the listener “hears” is determined by the speaker’s tone of voice
      • 14 percent from words actually spoken
communication skills4
Communication Skills

LO

  • Non-Verbal
    • Proximity
    • Eye Contact
    • Facial Expressions
    • Physical Contact
    • Smell
communication skills5
Communication Skills

LO

  • Verbal
    • Volume of Speech
    • Pleasant Voice
    • Avoid Industry “Jargon”
communication skills6
Communication Skills

LO

  • Written
    • Use standardized letters or memos
communication skills7
Communication Skills

LO

  • Proofing
    • Content
    • Grammar
    • Appearance
  • Email
communication skills8
Communication Skills

LO

  • Proofing: Content
    • Information accurate?
    • Message clear?
    • Avoided “jargon”?
    • Organized?
    • Written to reader’s level?
    • Reader know what is expected?
    • Does reader know when information is needed?
    • Avoided language that could create an E & O exposure?
    • Disclaimer
communication skills9
Communication Skills

LO

  • Proofing: Grammar
    • Spell check should not be the only tool
    • Look at punctuation
    • Other grammar issues
      • Subject-verb agreement
      • Possessive nouns
communication skills10
Communication Skills

LO

  • Proofing: Appearance
    • How does it look?
    • Is it spaced correctly?
    • Are the margins correct for the length of the message?
    • Is the font professional in appearance and easy to read?
communication skills11
Communication Skills

LO

  • Email
    • Formal communication
    • Discovered in court of law
    • Maintain professional appearance
    • Disclaimers
    • Out of office message
    • Message of no binding
learning objectives5
Learning Objectives
  • Explain the use of financial statements as a part of the underwriting process
  • Explain the purpose and components of a balance sheet and a profit & loss statement
basics of financial statement analysis
Basics of Financial Statement Analysis

LO

  • The financial condition of an insured is an important piece of the underwriting process
    • Direct relationship between financial condition and loss experience
    • Automation makes it easier for customers to provide financials
    • Confidentiality important
basics of financial statement analysis1
Basics of Financial Statement Analysis

LO

  • Basic Tools
    • Balance Sheet
    • Income and Expense Statement
    • Direct Bill, Account Current or Premium Finance
basics of financial statement analysis2
Basics of Financial Statement Analysis

LO

  • Balance Sheet
    • Assets
      • What is Owned
    • Liabilities
      • What is Owed
    • Equity
      • Assets Minus Liabilities
basics of financial statement analysis3
Basics of Financial Statement Analysis

LO

  • Balance Sheet
    • Statement of financial condition on a given date
    • A snapshot of one moment in time
basics of financial statement analysis4
Basics of Financial Statement Analysis

LO

  • Income and Expense Statement(Profit and Loss Statement)
    • Summarizes financial results over a period of time
    • A movie with a beginning, middle and end
basics of financial statement analysis5
Basics of Financial Statement Analysis

LO

  • Income and Expense Statement(Profit and Loss Statement)
    • Determines profit or loss
    • Shows the revenues
    • Shows the expenses incurred to generate the revenues
basics of financial statement analysis6
Basics of Financial Statement Analysis

LO

  • Income and Expense Statement(Profit and Loss Statement)
    • Revenues Minus Expenses = Profit or Loss
    • Analyze statements for the past 3 to 5 years to identify trends
basics of financial statement analysis7
Basics of Financial Statement Analysis
  • Direct Bill, Account Current or Premium Finance Direct Bill
    • Direct Bill
      • Agency may be responsible for collecting the initial premium
      • Insurance company is responsible for sending premium billings to the insured and for sending late notices/notices of cancellation
basics of financial statement analysis8
Basics of Financial Statement Analysis
  • Account Current
    • Agency is responsible for collecting the premium and forwarding the net premium (gross premium less commission) to the insurance company
    • Premiums are held in a fiduciary capacity
basics of financial statement analysis9
Basics of Financial Statement Analysis
  • Account Current
    • Insurance Company issues a monthly statement
    • Net premium is due the company even if the insured has NOT paid the premium to the agency
    • Agency has to request the company to cancel the policy if premium is not paid
basics of financial statement analysis10
Basics of Financial Statement Analysis
  • Premium Finance
    • Finance agreement is submitted to the premium finance company along with the required down payment and any outstanding payments
    • Finance agreement allows the premium finance company to request cancellation in the event premiums are not paid by their due date
basics of financial statement analysis11
Basics of Financial Statement Analysis
  • Remember . . .
    • You don’t sell a policy, you sell coverage
    • Premium arrangements should be made at the time coverage is bound
    • Options
      • Direct Bill
      • Paid in Full
      • Premium Finance
learning objectives6
Learning Objectives
  • Explain the role of underwriting guidelines, including exceptions
  • Explain the guidelines for effective documentation
  • Explain the steps in account servicing for new business and policy services
personal commercial lines due diligence account management
Personal & Commercial Lines Due Diligence & Account Management
  • Know coverage differences among the policies available in your agency
    • “Best terms available”
    • Differences in perils, special limits, limits of liability, additional coverages, etc.
personal commercial lines due diligence account management1
Personal & Commercial Lines Due Diligence & Account Management

LO

  • Understand underwriting requirements
    • Indicator of type of business company interested in writing or not writing
    • May not always agree with them, but they are what they are
    • Review underwriting guidelines periodically to stay aware of changes
personal commercial lines due diligence account management2
Personal & Commercial Lines Due Diligence & Account Management

LO

  • Understand underwriting requirements
    • Know your binding authority
    • Majority of new business submitted should meet or exceed the underwriting guidelines
personal commercial lines due diligence account management3
Personal & Commercial Lines Due Diligence & Account Management

LO

  • Understand underwriting requirements
    • Some underwriting guidelines are non-negotiable
    • Underwriting exceptions
    • Know the company’s appetite and additional services available
personal commercial lines due diligence account management4
Personal & Commercial LinesDue Diligence & Account Management
  • Credit Scoring
    • Credit scoring is widely used as part of the underwriting process.
    • Each state can individually regulate the use of credit scoring
    • It is important for insurance professionals to understand and follow their state’s laws or rules regulating this issue.
personal commercial lines due diligence account management5
Personal & Commercial Lines Due Diligence & Account Management

Personal Due Diligence & Account Management

LO

  • Application to Policy
    • Application should be completed thoroughly, accurately and honestly
      • Correct person(s) or entity as named insured
      • Underwriting questions asked of and answered by the named insured
personal commercial lines due diligence account management6
Personal & Commercial Lines Due Diligence & Account Management

LO

  • Application to Policy
    • Could be a problem with coverage if information on the application is found to have been incorrect
    • Have named insured sign the application even if a signature is not required
    • Application may be completed by the producer and/or the CSR
personal commercial lines due diligence account management7
Personal & Commercial Lines Due Diligence & Account Management

LO

  • Application to Policy
    • Agency should never sign for an insured
    • Make sure the application is completely filled out including marking boxes that trigger coverage
personal commercial lines due diligence account management8
Personal & Commercial Lines Due Diligence & Account Management

LO

  • Additional Information
    • Loss runs
    • Supplemental applications
    • Financials
    • Photos
    • Copies of advertising/website
    • Driver’s list
    • Narrative
personal commercial lines due diligence account management9
Personal & Commercial Lines Due Diligence & Account Management

LO

  • Application to Policy
    • Document customer’s records with regard to any rejection of coverage, selection of reduced limits, etc.
    • Documentation
guidelines for effective documentation
Guidelines for Effective Documentation:

LO

  • Made in the agency management system according to the agency’s policies and procedures
  • More effective to use a “free form note screen” format rather than input areas that require exact information
guidelines for effective documentation1
Guidelines for Effective Documentation:

LO

  • Made immediately after the event creating the need for documentation has taken place
  • Should consist of “just the facts”; free of editorial or emotional comments
  • Documentation can be “discovered” in an errors and omissions lawsuit
personal commercial lines due diligence account management10
Personal & Commercial Lines Due Diligence & Account Management

LO

  • Application to Policy
    • Issue necessary binders, certificates of insurance, evidence of property insurance, identification cards, receipt, etc.
personal commercial lines due diligence account management11
Personal & Commercial Lines Due Diligence & Account Management

LO

  • Application to Policy
    • Upload the application within the required time frame
    • Set a follow up for the issuance of the policy
personal commercial lines due diligence account management12
Personal & Commercial Lines Due Diligence & Account Management

LO

  • Application to Policy
    • When the policy is issued, verify that it was issued correctly
    • The time to discover an error is before a loss occurs!
personal commercial lines due diligence account management13
Personal & Commercial Lines Due Diligence & Account Management

LO

  • Account Servicing: Changes
    • Verify the person requesting the change is the named insured
    • Ask the insured for all of the information necessary to make the change
    • Verify the insurable interest of the property being added
personal commercial lines due diligence account management14
Personal & Commercial Lines Due Diligence & Account Management

LO

  • Account Servicing: Changes
    • Advise the insured when they will receive verification of the change from the insurance company
personal commercial lines due diligence account management15
Personal & Commercial Lines Due Diligence & Account Management

LO

  • Account Servicing: Changes
    • Request endorsement from the insurance company
    • Make changes to the customer’s policy information in the agency management system
    • Use the contact to cross-sell or account develop!
personal commercial lines due diligence account management16
Personal & Commercial Lines Due Diligence & Account Management

LO

  • Account Servicing: Changes
    • Document customer’s records
    • Mail policy change confirmation to insured
    • Set a follow up for the endorsement to be processed
    • Verify endorsement was issued correctly

Claims Servicing Covered Later

personal commercial lines due diligence account management17
Personal & Commercial Lines Due Diligence & Account Management
  • Renewals
    • Generate renewal list 90 to 120 days prior to renewal
    • Meet with producer to discuss the account and determine who will get updated information
    • Areas to update information
personal commercial lines due diligence account management18
Personal & Commercial Lines Due Diligence & Account Management
  • Renewals
    • Discuss with insured any changes or new coverages available
    • Complete renewal application and submit to company
learning objectives7
Learning Objectives
  • Explain the differences between a Certificate of Insurance, an Evidence of Property Insurance form, and a Binder
  • Explain the importance of inspections and recommendations
  • Explain how a service center works
other account servicing issues
Other Account Servicing Issues

LO

  • Certificate of Insurance
    • Informational purposes only
    • Not a contract or legal document and it does not give any right to the certificate holder
    • Does not amend, extend or change the policy
    • Forward certificate to insurance company
other account servicing issues1
Other Account Servicing Issues

LO

  • Evidence of Property Insurance
    • Evidence that insurance is in force
    • Issued for information purposes only
    • Not a contract or legal document and does not give any rights to the certificate holder
    • Does not amend, extend or change the policy
other account servicing issues2
Other Account Servicing Issues

LO

  • Binder
    • Temporary insurance contract
    • Issued when coverage is bound and the agency either has binding authority or received permission from the insurance company to bind coverage
    • Issued by person authorized in the agency
other account servicing issues3
Other Account Servicing Issues

LO

  • Binder
    • Use policy language and terminology
    • Must comply with state laws regarding content of the binder
other account servicing issues4
Other Account Servicing Issues

LO

  • Binder
    • ACORD is the standard form; language should not be amended without the approval of the insurance company
    • Reverse side of the binder contains important language and should be included with every binder issued
other account servicing issues5
Other Account Servicing Issues

LO

  • Binder
    • Forward copy of the binder to the insurance company
    • Follow up to make sure coverage was either replaced by a policy or notification was sent to the insured advising that all coverage was no longer in force
other account servicing issues6
Other Account Servicing Issues
  • Cancellation Request/Lost Policy Release
    • Obtain the right signature
    • Include the time the cancellation is to be effective
other account servicing issues7
Other Account Servicing Issues
  • Additional insured and additional named insured requests
    • Determine the interest of the individual or entity being added
    • Make sure the named insured understands how this could affect coverage in the event of a claim
other account servicing issues8
Other Account Servicing Issues

LO

  • Inspection and Compliance Required
    • Purpose is to identify hazards, verify operations, establish property values, determine fire and life safety protection, etc.
    • Insurance companies may use staff or outsource
other account servicing issues9
Other Account Servicing Issues

LO

  • Inspection and Compliance Required
    • In some instances, coverage may not be bound until inspection has been made and it is found to meet underwriting approval
    • Suggested: insured’s discretion
    • Mandatory: must be satisfied
other account servicing issues10
Other Account Servicing Issues
  • Proposals
    • Professionally written format
    • Summarize the coverage using policy language with disclaimer
    • Include information about the agency
    • More than a premium quote
other account servicing issues11
Other Account Servicing Issues
  • Lack of a Market
    • Due diligence effort
    • Don’t promise that coverage can be placed
    • Don’t “down play” the seriousness of a non-renewal or cancellation

Diligence:

Continual effort to accomplish something

other account servicing issues12
Other Account Servicing Issues
  • Lack of a Market
    • If coverage cannot be found in an admitted market, the non-admitted market may be used
    • If coverage cannot be found, customers should have enough notice as to allow them to locate coverage elsewhere
other account servicing issues13
Other Account Servicing Issues

LO

  • Using Service Centers
    • Used to transfer the servicing to the insurance company’s service center
    • Typically personal lines and small commercial
    • Agency’s goal is to remove servicing responsibilities to allow time for sales or to reduce personnel
other account servicing issues14
Other Account Servicing Issues

LO

  • Using Service Centers
    • Send customers a letter which includes the toll free number and the benefits they should expect
    • Inquiries falling outside of the scope of services to be provided are forwarded to the agency
    • Contract should outline scope of services
other account servicing issues15
Other Account Servicing Issues

LO

  • Using Service Centers
    • Procedures should be in place as to notification of new sales, claims, etc.
    • Retention should be monitored
    • Maintain central log
learning objectives8
Learning Objectives
  • Explain the steps in claims processing

2. Explain the purpose of a Claims Log

claims processing
Claims Processing

LO

  • Insured Reports the Claim
    • Complete ACORD form
    • Be sensitive to privacy issues
    • Record accurate information
      • “Just the Facts”
claims processing1
Claims Processing

LO

  • Insured Reports the Claim
    • Do not leave any section blank
      • “N/A” vs. “None”
    • Understand that most people have not experienced a loss previously and are unfamiliar with the claims process
claims processing2
Claims Processing

LO

  • Insured Reports the Claim
    • Do not indicate whether the loss is covered or not covered
    • Advise customers of their responsibilities (PINES)
    • Let the customers know what to expect next
claims processing3
Claims Processing

LO

  • Insured Reports the Claim
    • Send the customer a claims acknowledgement letter
    • Notify producer, supervisor, management, etc., of large losses, questionable losses or losses with coverage in question
claims processing4
Claims Processing

LO

  • Report the Claim to the Company
    • Immediately report the claim
    • Policy conditions typically require the insured to promptly report the loss
claims processing5
Claims Processing

LO

  • Report the Claim to the Company
    • Failure of the agency to report the loss could create an errors and omissions exposure
    • Unfair Claim Practices statutes or regulations may require the agency to report all losses even if the insured does not want it reported
claims processing6
Claims Processing

LO

  • Direct Reporting
    • Insured reports the claim to the insurance company
    • When is the agency notified of the loss?
claims processing7
Claims Processing

LO

  • Claims Log
    • Maintain on agency management system
    • Use it to provide:
      • Claims count
      • Number of open claims
      • Time between first notice and closure
claims processing8
Claims Processing

LO

  • Claims Log
    • Review regularly to identify loss trends or loss ratio issues
    • Compare to insurance company’s loss ratio reports for accuracy
claims processing9
Claims Processing
  • Other Claims Issues
    • When the claimant reports the claim
    • Privacy issues
    • Confidentiality
    • Reservation of rights letter
    • Suit and Summons
    • Claims survey
learning objectives9
Learning Objectives
  • Identify the four benefits of ethical behavior
  • Explain the difference between statutes, oral and written agreements, and peer standards
  • Explain the differences between actual, implied and apparent authority
  • Explain the common causes of claims made against agents by insureds and insurance companies
professional responsibilities ethical and legal behavior
Professional Responsibilities:Ethical and Legal Behavior

Ethics . . .

A discipline dealing with good and

evil and with moral duty;

moral principles or practice

A set of rules, based on a set of principles or values that we accept as truths and that govern our behavior

professional responsibilities ethical and legal behavior1
Professional Responsibilities:Ethical and Legal Behavior

LO

  • Why Be Ethical?
    • Social Responsibility
    • Avoid of Public Criticism
    • Avoid Government Regulation
    • Enhance Your Credibility With Customers and Companies
excuses for unethical behavior
“Excuses” for Unethical Behavior
  • “Everyone is unethical at one time or another; therefore, it is no big deal. Everybody does it.”
  • “Nothing too serious will happen if I get caught.”
  • “I will do what I have to do to make the sale.”
excuses for unethical behavior1
“Excuses” for Unethical Behavior
  • “If I don’t get the policy written, my bonus is out the door.”
  • “It’s not really hurting anyone.”
  • “I’ll change it/fix it later.”
  • “I thought it was okay to do.”

Training Issue

slide152

Vehicle Usage

Protection Class

Property Values

Other Residents in the Household

Young Drivers in the Household

Rate Basis, Classification

or Garaging Address

Signing for an Insured

incorrect rating unprofitable business
Incorrect Rating = Unprofitable Business

Risk is intentionally misrated in order to write the coverage.

Resulting in

Unprofitability/Poor Loss Ratio

Insurer does not receive the written premium for the exposure on which the rates were predicated.

Therefore, insurer does not receive the earned premium for the exposure necessary to pay for the losses it predicted would occur.

questions to ask
Questions to Ask
  • How would I feel if the facts surrounding my conduct or decision appeared on the front of the local newspaper?
  • How would I feel if I had to explain my actions to my friends and family?
  • How would I feel if someone took the same action with a member of my family?
  • Will I be able to look myself in the mirror tomorrow morning?
  • Is it legal?
professional responsibilities ethical and legal behavior2
Professional Responsibilities:Ethical and Legal Behavior

LO

  • Legal Duties Are Based On:
    • Peer Standards
    • Oral or Written Agreements
    • Statutes
professional responsibilities ethical and legal behavior3
Professional Responsibilities:Ethical and Legal Behavior

LO

  • Act Within Your Authority
    • Actual or Expressed
    • Implied
    • Apparent
professional responsibilities ethical and legal behavior4
Professional Responsibilities:Ethical and Legal Behavior

LO

  • Actual or Expressed
    • Actual authority is expressly given by the insurance company as found in the agency contract or agreement
professional responsibilities ethical and legal behavior5
Professional Responsibilities:Ethical and Legal Behavior

LO

  • Implied
    • Must first have Actual or Expressed authority
    • Principal (insurance company) has allowed the agent to have the appearance of authority;
    • Authority through estoppel; or
    • Authority through custom and usage
professional responsibilities ethical and legal behavior6
Professional Responsibilities:Ethical and Legal Behavior

LO

  • Apparent
    • Customer believes the agent has the authority
    • Protects the insured from unauthorized acts of the agent
    • Such acts may bind the insurance company; however, it may subrogate against the agent
professional responsibilities ethical and legal behavior7
Professional Responsibilities:Ethical and Legal Behavior
  • Errors and Omissions Claims
  • Agents Can Be Sued By Insureds and Insurance Companies
professional responsibilities ethical and legal behavior8
Professional Responsibilities:Ethical and Legal Behavior

LO

  • Common Causes of Claims

Made Against Agents By Insureds

    • Failure to obtain proper coverage
    • Failure to place coverage after agreeing to it
    • Failure to give proper advice
    • Failure to advise insured promptly of rejection or lack of coverage
professional responsibilities ethical and legal behavior9
Professional Responsibilities:Ethical and Legal Behavior

LO

  • Common Causes of Claims

Made Against Agents By Insureds

    • Failure to renew coverage
    • Failure to service policies
    • Failure to place on best terms available
    • Misrepresentation
professional responsibilities ethical and legal behavior10
Professional Responsibilities:Ethical and Legal Behavior

LO

  • Common Causes of Claims

Made Against Agents By Insureds

    • Placing with an insolvent insurer or unauthorized insurer
    • Modification of established service to customers
    • Making a clerical error
professional responsibilities ethical and legal behavior11
Professional Responsibilities:Ethical and Legal Behavior

LO

  • Common Causes of Claims Made

Against Agents By Companies

    • Exceeding binding authority and/or underwriting authority
    • Failure to notify carrier of material change in risk
    • Misrepresenting the risk
    • Delay in forwarding loss information
contributors to e o claims
Contributors to E & O Claims

Contributors to E & O Claims

Lack of Product Knowledge

Lack of Consistent Procedures

Lack of Documentation

professional responsibilities ethical and legal behavior12
Professional Responsibilities:Ethical and Legal Behavior
  • Agency Defense Activities
    • Don’t wait before preparing
    • Report the claim to your E & O Carrier
    • Assign one person to act as claims coordinator
professional responsibilities ethical and legal behavior13
Professional Responsibilities:Ethical and Legal Behavior
  • Agency Defense Activities
    • Hold a staff meeting including all involved agency personnel
      • Discuss the situation in general
      • Have each person briefly describe their involvement and in writing
professional responsibilities ethical and legal behavior14
Professional Responsibilities:Ethical and Legal Behavior
  • Agency Defense Activities
    • Coordinator gathers all pertinent information into a master file and prepares a chronological written narrative
    • Remind all to maintain confidentiality
professional responsibilities ethical and legal behavior15
Professional Responsibilities:Ethical and Legal Behavior
  • Agency Defense Activities
    • Prepare to be a good witness
    • Do not change any operating procedures afterwards without approval of your E & O Carrier
    • Let the agency staff know the results