NAIFA Professional Liability Insurance Programs Loss Control - - PowerPoint PPT Presentation
NAIFA Professional Liability Insurance Programs Loss Control Seminar Seminar Objectives After completing this seminar, you will be able to: Identify the legal basis for agents professional liability claims Identify professional
After completing this seminar, you will be able to:
agency management
commonly sold by NAIFA members
Claims in the news/ litigation Deep pockets Presence of E&O policies Expanding theory of liability Status as a Professional Risk Management Approach Due Diligence Focus on Top Line or Bottom Line Growth
Attorney fees Loss payments or deductible Time away from office while in discovery or trial Loss of current business Increase in insurance premium
See workbook
A client has a right to sue. A client doesn’t have to be
The only requirements are a plaintiff, a filing fee and a
A third party trier of fact will ultimately decide if the
Reasonable behavior so as not to cause harm There must be the establishment of a level of
An act or failure to act that establishes a duty
The attempt to establish this breach manifests
For a claim to be successful there must be some
Those damages must flow directly from the
Negligence - Failure to perform in a manner
Negligent Misrepresentation Intentional Misrepresentation / Fraud
Vicarious Liability – responsibility for acts of
Breach of Fiduciary Duty – exercising your own
Actual Punitive Statutory / Treble
The relationship between agent and client can
General – Reasonable Knowledge of policies being
Special – Fiduciary, Expert
Express – holding yourself out as an
Implied – circumstances of a particular
Know underwriting guidelines/authority Disclose all material facts Make sure applicants complete applications with
Don’t sign for the insured Good faith
Obtain requested coverage within a reasonable
Select carriers and review Know products Understand client needs No unsubstantiated statements (Don’t guess) Know your authority
Expert Specialist Counselor Advisor Consultant Professional
Suitability 6% Failure to Provide 13% Failure to Explain 11% Other 2% Business Mgmt 9% Policy Change 9% Beneficiary 2% Tax Loss 4% Misrepresentation 25% Office Error 11% Premium Error 6% Due Diligence 2%
Individual Life 21% Pension Plans 13% Group Life 4% Group A&H 22% Individual Disability 2% Other 9% Individual A&H 9% Management or Business Issues 6% Fixed Annuities 6% Variable Annuities 4% Long Term Care 4%
Group Life: $10,808 Individual Life: $40,479 Annuities: $20,386 Disability Products: $149,116 Pension Products: $71,068 Financial Products: $13,270
54% of all claims are reported as potential claims, and
18% of contested claims are closed with no indemnity
Average cost to defend these claims is $19,145
30% of closed paid claims are settled without defense
Importance of Documentation
Terms and conditions of the policy Life Products
Health Products
Pre-existing conditions Maternity Benefits Excluded coverage – riders Eligibility Deductible
PPACA - It’s a new world.
Never answer on behalf of a client Don’t filter information Customer’s own handwriting where
Importance of accuracy & honesty
Don’t use term “Vanishing Premium”!!! Use illustration Copy to applicant, copy to file Use disclosure form – advise of changes in
Monitor and review
Is replacement necessary? Avoid appearance of twisting, churning Provide required forms Disclose the impact of new policy terms Advise on tax consequences Disclose new incontestability provisions Is coverage identical?
Keep old policy in force until new policy
Late payment of premium Lapse Reinstatement representations Notice of lapse or cancellation
Avoid advising on which type of coverage
Clients decision on affordability and comfort
Advise of policy limits and exclusions Take notes on conversations and follow up in
Accuracy is important Implement immediately Document changes in writing
Time is critical
Insurability can change – prompt delivery of
Timely documentation of all follow up
Timely follow up with carrier on questions and
Timely Delivery of policy
Has client health deteriorated since date
Verify policy & riders accurate Review coverage with customer
Never release blank apps Have applicants complete forms in your
Take action promptly on application Never “front” premiums for clients Explain when coverage is effective
Proper documentation
Lack of documentation is
Documentation is a cost
Level 0 – No Documentation, Rely on Memory Level 1 – Use File Notes Level 2 – Use Confirming Letters Level 3 - Firing the Client
Does not carry much weight with juries.
Testifying as to regular habit and practice Pointing out customer’s story is inherently
File notes bolster your credibility and answer the
Record what the customer asked for, what you
A letter to the client confirming recommendations and
A letter from Client such as “I appreciate your business,
Sometimes you have the sense that a problem client is
“Dear John, I will not be able to continue to act as your
Customer’s needs and exposures All coverages offered or quoted Responses to questions / inquiries Representations about coverage Recommendations Customer’s refusal to follow recommendations Telephone conversations
Telephone log
Lined pages Initialed, signed Detailed Confirming letter Electronic with back up
No loose notes or Post-it notes No undated information E-mails/recordings - backup
Inadequate coverage Description and identification errors Policy change errors Application errors Insolvent carriers
Reflects your professionalism, credibility,
Should be complete enough to recreate
Critical if individuals involved have moved,
Questionnaires Proposals Checklists Disclosure forms
Accuracy is paramount
Be careful Slow down Read and complete all questions
Client should have ownership
Have applicant read and sign completed application Witness signature Send letter on incorrect medical history
Don’t Sign for Applicant
Know specific information required Setup medical appointments Follow-up with underwriting
Know the terms of each carrier
Don’t exceed carrier authority Leave conditional receipt with
Explain receipt to applicant
Job descriptions Document training of new employees Routine compliance audits Update staff on pertinent changes Performance reviews should support
Cash management Records management Suspense procedures Specific product line procedures Claims handling procedures Standardized Forms Paper/electronic flow / date stamping
One central file location Consistency and completeness Complies with states’ record retention
Logs incoming and outgoing calls Transaction checklists
Pending / new business Renewals Changes pending Expiration dates Correspondence requiring a reply
Checklist for transaction Each party needs to understand their
Don’t assume If outside agent- make sure other agent has
Offer several alternatives Evaluate qualifications of each professional Make client do the selection Document names offered, clients decision Verify referrals have E&O insurance
Design a risk management program
Continuing education is a must for all
Treat others fairly Focus on ethics
Individually underwritten policies (NAIFA)
Company/Group sponsored product Broker dealer sponsored product
“Claims made and reported” Limits of liability Deductible Defense costs Prior Acts Coverage / Retroactive Date
Insured activities Extended reporting period Renewal provisions Consent to settle Claims reporting requirements
1/1/2008
Error Date – submitted incorrect App
2/1/2009
1st E&O policy Effective date/also the retro- date
2/1/2010
2nd E&O policy Effective Date/carries forward the 2/1/2009 retro date
4/5/2010
E&O Claim reported for rescinded policy The agent is uninsured at the time the error is made. The error isn’t discovered for over 2
in no coverage for the claim reported during the 2/1/2010 policy
3/1/1989
First continuously maintained E&O policy
3/1/2010
Last continuously maintained policy termination date
7/1/1999
Error Date- submitted incorrect app
3/1/2015
Last day to report claim under a 5 yr ERP
7/9/2012
Claim Reported The agent decided to retire on 3/1/2010, so he allowed his policy to terminate. Many policies have a limited time to report claims after termination. If a claim is reported after termination and no ERP exists, the claim on 7/9/2012 will not be
covered under the policy. This claim would be covered under a 3 year ERP
ERP Period
Log response date Notify Carrier Written narrative Copy of file
Don’t admit liability Don’t discuss claim with others Don’t incur expenses Carrier usually hires attorney
The Complaint Discovery
Trial Settlement Appeals Process ADR
Disability Income Products
“ERISA” Health Plans
Annuity Products
Self-Insured / Self-funded products
Financial Products
There are numerous carriers, marketing organizations
Numerous states have interpreted poor sales practices
Claims involving seniors frequently come from
Do not continue if you suspect some cognitive issues or
Ask the senior to have a family member or trusted care
Document meetings in writing, include family members in
Extra care should be taken regarding suitability - e.g. if
Good agents can have claims – Overall, most
Document, Document, Document! - Make