Don’t Let Your Clients Become Claimants

E&O Claim Case StudyOften times, you will be looked to for sound advice and asked to recommend an insurance solution for your clients. You should provide more than one product option and take the time to explain all ramifications, especially if your clients currently have insurance in place and are contemplating making a change or possibly surrendering a policy.  It certainly would be wise to provide something in writing regarding your discussions with clients and keep a copy for your file.

The agent below, Roger, certainly did not act in his client’s best interest.  As a result, he was faced with a significant E&O claim.

You see, Roger allegedly recommended improper life products to his clients.  They later became claimants.  Roger’s clients’ claim was that Roger had convinced them to surrender their 10 year $250,000 life insurance policy that was purchased in 2008.

According to the clients, their agent, Roger, replaced that long-standing policy with a Joint Last-to-Die contract that would not serve the needs of the family.  His clients discovered that they would not have enough money to fund the premiums.  They claimed that the agent convinced them to refinance their home and use $10,000 to fund the policy.

During the course of the E&O claim, it was discovered that Roger’s recommended course of action was not suitable for the client and E&O Insurance stepped in to fund the reversal of the transaction.

Insurance Companies always want proof of a producer’s E&O Insurance.  Insurance Companies are not going to back their producers and provide assistance with any law suits brought against them in regard to products that were sold.

Even though you have E&O Insurance in place, you should be very diligent in your everyday practices and work hard to avoid any situations that might cause difficulty for your clients, especially if they do not understand what will be required of them.

Every E&O application asks if you have had any E&O claims.  Having one such claim can make you ineligible to renew in some Life Agent Programs.  Should this occur, you will be faced with providing the new insurer with steps you have implemented to avoid future, similar claims, and, if they feel comfortable quoting, you will be paying considerably more for your E&O Insurance.

Your reputation is at stake every time you interact with someone.  It is very important that you put your clients’ best interest above your own every step of the way.  By documenting the various stages of your sales process and being sure that your clients sign off on any recommended changes involving a current policy, should something happen that turns a client into a claimant, you will have meticulous records to support the work you did during sales transaction.

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