Most businesses like to say they deliver quality, but are they really set up to create quality.
Accidents and mistakes will happen. However, we can create a system to minimize accidents and mistakes. It is also important to catch errors and correct them. Not only is the mistake corrected, but also it becomes a great learning experience.
The vast majority of E&O claims are the result of an error or a mistake. Typically, errors or mistakes are preventable. Some of the prime reasons errors or mistakes occur are due to lack of proper training, the lack of clear and adequate policies and procedures, inconsistency in performing tasks, being rushed and not completing tasks.
Some of the typical E&O claims made by clients and carriers include:
Ø Failure to place requested coverage or increase/update coverage
Ø Failure to recommend needed coverage or explain coverage limitations
Ø Clerical error on forms or misunderstanding of information
Ø A verbal extension of nonexistent coverage
Ø Failure to advise of cancellation, non-renewal, or material restrictions
Ø Failure to place coverage with a solvent insurer
Ø Failure to following underwriting guidelines or exceeding authority
There are four pillars to improve quality and prevent E&O issues. They are: 1) Training and Education, 2) Uniform Policies and Procedures, 3) Proper Documentation and 4) Performance Audits. All four of these approaches to improve quality must be in place or the system will be ineffective. There is no sense in having great polices and procedures, if there is no review of the performance and compliance through an audit.
Education and Training –Training for the technical aspects of insurance is important clearly required, however, training should also be done for computers/software, accounting, agency operations, customer service, as well as internal agency policies and procedures.
Uniform Policies and Procedures – Effective E&O prevention requires the agency to have written workflow procedures, as well as written policy standards for servicing accounts and writing business. An effective tool is the use of checklists, which should be used as much as possible. Many errors can be prevented by the use of a coverage checklist or a checklist for reviewing a policy.
Proper Documentation – Proper (and consistent) documentation can make the difference in an E&O claim. Notes should be put in a format that is not changeable, such as the agency’s automation system instead of Outlook. This increases the reliability of the documentation. The client should sign checklists and proposals as a means of recording their acknowledgement of the coverages available and what they are getting.
Performance Audits – The only way the system can be evaluated is if it is reviewed and tested. Each aspect of the system needs to be audited for compliance and accuracy. The feedback from an audit can then be used to improve workflow procedures, identify training needs and clarify policies or standards.
An outside E&O auditor should be used every three to five years. They can look at the agency from a dispassionate position and compare the results to industry standards. They are able to ask the tough questions and not worry about any “sacred cows” in the agency.
A second type of audit is an internal audit that should be done every six months. One employee should review another’s work and client files for accuracy and compliance. This approach will help keep the system in check between audits from an outside expert. This review also works great for training new employees. Employees need to be clear that the audit process is to evaluate the agency for E&O compliance and not rate their individual performance. However, corrections that arise from an audit could include additional training for specific employees.