Insurance agents can be some of the most important people you’ll ever do business with. They will help you protect your property, your assets and your finances. The work of an insurance agent has the potential to save you from financial ruin.
You could go through your whole lifetime and not need the services of an attorney. You could live and die and not have to use an accountant. But you can’t live in “the real world” without insurance agents.
But remember…it’s YOUR responsibility to learn which coverages are right for you.
Have you ever heard a story from a friend or relative who filed an insurance claim, only to find out that the coverage their agent promised was not there? I hear those stories ALL THE TIME, and at the WORST POSSIBLE TIME…AT CLAIMS TIME!
I began my insurance career as an agent in 1973. I kept my agent licenses active until 1992 when I became an insurance adjuster. During that period of time, I sold nearly every kind of insurance imaginable. That gave me a depth of experience in insurance sales. But all of that experience did not make me an expert in insurance. I learned risk analysis and sales techniques. But I don’t think that I ever had one minutes’ training in how to handle a claim. When my clients had a claim, I gave them the company’s phone number and told them to call it in. We occasionally filled out an Acord form, which is a standard industry form for filing a claim. That was all we did.
The best agent is a person who has spend time studying insurance, not a person who is an expert in sales. The largest percentage of insurance agents of all types are sales people, not insurance experts. Your agent may or may not be an expert in insurance. You’ll have to simply ask your agent what his education level is.
There are a lot of colleges and universities that offer degrees in insurance today. In our area, the University of Georgia offers degrees in Risk Management and Insurance. It’s a pretty well-respected program.
Agents can also become experts in insurance by going through continuing education, such as the Certified Property Casualty Underwriter (CPCU) education program. Life insurance agents can achieve the Certified Life Underwriter (CLU) professional designation. There are other designations available to agents, but those two are the most widely accepted educational programs.
Agents in most states also have to complete a state-required number of Continuing Education hours each year in order to maintain their insurance licenses. If they don’t complete the hours, the state cancels their licenses.
An agent has a duty to you, called the “fiduciary duty.” That means that he must keep your financial well-being first in his priorities. If an agent sells you an insurance policy because it has a higher commission than another policy, he has breached his fiduciary duty to you.
Agents usually carry a type of liability insurance called “Errors and Omissions” liability insurance. Errors and omssions (E&O) is the insurance that covers the agent’s company, or the agent individually, in the event that a client holds the agent responsible for a service he provided, or failed to provide, that did not have the expected or promised results. This protects agents and their clerical staff from liability due to negligent acts, errors and omissions while conducting their business. It will protect the agent from problems like the following examples:
1. loss of client data. The agent simply loses your file, physically or electronically.
2. system or software failure. Computer at the agent’s office crashes and all data is lost.
3. negligent oversell. The agent sells you coverage you don’t need, or sells you coverage limits higher than necessary.
4. claims of non-performance. This is a broad category but needs to be. This could include charges that an agent did not sell the proper policy, or the proper amount of coverage.
The number 4 example above is the most prevalent and most dangerous for agents. Here’s why.
People today have multiple insurance exposures, like:
auto physical damage
auto liability
uninsured or underinsured motorists exposures
homeowner physical damage
homeowner liability
excess liability
businessowner physical damage
businessowner liability
home-based businesses
life insurance needs
health insurance needs
disability insurance needs
Any one of the exposures listed above can effect any of the others. They are intricately woven together in each of our lives.
Any agent doing business in the modern world should do an insurance analysis of any prospect’s present insurance and his future insurance requirements. To fail to do so is an invitation for a lawsuit.
What does this mean to you?
First: If your agent makes promises to you about coverage, and your claim gets denied, you can make a claim against the agent’s Errors and Omissions Liability policy. You may have to get an attorney involved, but that only increases the chance that your denied claim will get paid.
Next: In my never-to-be-humble opinion, ALL agents selling ANY kind of insurance should perform a Insurance Needs Analysis for the prospect PRIOR to selling the policy. In addition, I believe that an agent should carefully explain the findings of the Insurance Needs Analysis to the prospect PRIOR to selling the policy. Once the explanation is complete, the agent should require the prospect to sign off on the policies that are sold, and sign off on the policies and coverages that are not sold. “Signing off” simply means that the prospect states that the agent has explained all coverages, and he either accepts or rejects any given coverage.
Both parties..the agent and the policyholder…benefit in this transaction. The policyholder has a complete explanation of the policy he’s buying and its relationship to all his other insurance. The agent sells the right coverage, and significantly lowers the risk of a lawsuit or claim against his E&O coverage for selling the wrong coverage.
Here’s what an insurance analysis procedure should look like.
1. Personal Information Collection: get as much information about the insured and his family members as possible.
2. Get Copies of Existing Policies: the agent should actually read the existing policies.
3. Analyze Insurance Needs: determine the correct coverages needed and the correct policy limits.
4. Recommendations: what should be purchased and prices.
5. Application and Sign-off Analysis: fill out the application and have the insured sign off on the analysis form.
6. Deliver the Policy: An agent should deliver the policy in person and explain it again, not just send you a copy in the mail.
Even after all of the training and education that any insurance agent acquires, the agent is still not an expert in how to handle an insurance claim. I’ve had lots of people tell me that they were going to get their agent to help them with their claim. Later, they figured out that the agent didn’t know much more about the claims process than they did. As I wrote earlier, agents can become experts, but their expertise is customarily in the sales and needs analysis areas of insurance…not claims. For most agents, learning the claims process would be a waste of their time, since most agents are not licensed to handle claims.
Sure…some agents will be given a small claims settlement authority by the company they work for. Some agents will be able to settle claims up to about $5,000.00, and then only in the property side of the claim…such as a small water loss or a theft. But, for the most part, the insurance company concentrates claims handling with the claims employees and independent claims adjusters.
The most important strategies you should take from this article are:
1. Interview EVERY insurance agent to find out their level of expertise. Only do business with the most qualified, educated and experienced agents. Let the inexperienced agents practice on people who don’t care about protecting themselves the right ways.
2. Don’t always chase after the lowest premium. You get what you pay for. You’d be better served to pay a higher premium if a highly qualified agent takes care of you. You don’t drive the cheapest car you can find, do you?
3. Never be hesitant to call the Department of Insurance of your state if you have problems with your agent. Agents are regulated for a reason.
If you’ve had bad experiences with insurance agents, how about telling us about it?