WHAT IS THE POINT ...
I recently had a discussion with an agency owner regarding whether following good procedures made any sense . He wanted to stop following certain E & O preventive procedures in order to increase sales and make life easier on his producers . From an E & O perspective , the procedures we discussed were clearly black and white issues . The procedures clearly decreased E & O exposures .
So academically , the answer was easy . But in the real world , the answer was not so clear . As an example , I once visited an agency with some of the worst procedures I have ever seen and even after a large natural disaster , no one sued them . Their customers absolutely did not have the right coverages and the agency clearly messed up in my opinion . Yet they did not get sued .
This brings to light the real world decisions agency owners and managers must make regarding procedures . They see the same results . The lazy agency that does not follow procedures doesn ’ t get sued , while the agency that does everything correct does . As the saying goes , “ I ’ d rather be lucky than good .”
written by Chris Burand , Burand & Associates
So it really comes down to managing risk . Is there a way to measure the risk versus the reward of good procedures ? The answer depends on the complexity of the procedure . For many procedural changes the risk and reward are easily measured . For example , a simple disclaimer on proposals or emails has a price of $ 0 so why not do it ?
A more complex change such as mandated coverage checklists has a price . Time is definitely involved . No doubt it increases cost some . The benefits are very significant though . Sales increase and E & O exposures decrease significantly .
The last odds I saw showed that one in twelve agencies were sued each year . I have seen reports that the use of a coverage checklist reduces suits by 50 %. So the use of a coverage checklist improves the odds to one in twenty-four . Moreover , the odds are that sales increase more than enough to cover the cost of using coverage checklists ( at least that is what I have experienced with my clients that have implemented them completely ). So the value gained is more than enough to cover the cost .
18 KANSAS INSURANCE AGENT & BROKER