Curtis Pearsall — Pearsall & Associates & a consultant to Utica
An uncovered exposure is typically the number one cause of an Agents’ Errors & Omissions (E&O) claim. Therefore, the more exposures an agency insures, the lower the E&O exposure.
While virtually every agency focuses on writing new business, the potential to write additional policies is likely within the agency’s current book. Recent industry surveys indicate that, on average, insurance agencies write fewer than 1.7 policies per account. The average Personal Lines account has 5-6 policy opportunities at a minimum, so there is real potential to write business from within the current book.
If you don’t know your agency’s specific numbers, now is a good time find out. Every agency should have account development strategies that include, among other things, a commitment to identify cross-selling and account-rounding opportunities.
Greater opportunities, greater defense
More effective use of your agency management system will help. For example, how can you determine which accounts your agency has with an auto policy and a homeowner’s policy, but no umbrella? Many agency management systems have the capability to identify these customers. By interacting with and marketing to them, you can write more insurance while at the same time minimizing your E&O potential.
A recent insurance survey indicated that over 50% of renters do not have the proper coverage because they believe their landlord’s insurance covers their personal belongings. This is clearly an opportunity to educate customers and write more business.
These strategies also provide a greater defense if an E&O claim develops and the customer alleges that you never discussed a specific coverage with them. While not every customer will purchase every coverage suggested, properly documenting discussions and declinations enhances the agency’s E&O protection.
Does your agency management system have this capability? If so, is your agency using it to identify gaps in coverage? Many agencies have established campaigns to market to customers who have gaps. This will help to grow your policy count while reducing your E&O exposure. Imagine if your agency added just one more policy per customer over the next year. Remember, too, that the more business you write for each customer, the better your retention will be.
Another approach worth considering involves looking for cross-selling opportunities every time your agency interacts with a customer. Some agencies provide customer service representatives with a new business incentive for “rounding out” their customers’ insurance programs. Whichever approach your agency considers means greater growth and profitability.
This is a win-win for everyone.