| RISK MANAGEMENT |
to have more options when it comes to defending a claim.
There is a prevailing theory that if you carry higher limits,
you are going to get hit with bigger claims. What about
the claims situations where your carrier can save you from
multi-million dollar claims because your higher limits allow
them the flexibility to not just settle at the policy limit? This
is the story that appears to be playing out in Kansas. When
looking at some of the largest E&O claims, it seems to ring
true that agencies carrying minimum limits may be forced
to settle a claim due to fear that if the case is lost, the claim
may exceed policy limits. In contrast, there are cases where
claims settle for less than half of the original value of the
claim, all because the claims handler had options within
the agency E&O limits to work on a defense. Consider how
growth impacts your exposure and make room in your
budget to protect your agency with higher limits.
DEDUCTIBLES
What in the world does the deductible on your agency
E&O policy have to do with strategic planning? The
answer lies in the way that your agency procedures may
influence your deductible. Many carriers include some
vanishing deductible feature in their policy forms. These
generally involve a time element. Maybe you need to be
with the carrier for several years before you qualify. Swiss
Re took a unique approach to this element a few years
ago when they created their deductible reduction feature.
The philosophy behind this enhancement is that well-
documented files have a positive impact on agency E&O
claims.
Additionally, many claims involve some level of “no
coverage” issue. Swiss Re decided that if your file indicates
that you discussed the coverage in question with your
insured, they will waive your deductible 100 percent up to
$25,000 every time you have a claim. Not only is this useful
information to note if you are a Swiss Re policyholder, but
it may also dictate the need for some procedural review in
your strategic plan. If your staff does not have a procedure
to document coverage rejections from customers, consider
adding it to your agency’s strategic plan.
While it is important to focus on risk management, there
is an obvious need for balance with practicality. If agents
spend all of their time on risk management, opportunities
for growth may be lost. By taking some time to consider
how risk management fits into your overall plan for the year,
you can ensure there is plenty of room for both growing
and managing your exposures.
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