How to Increase your E&O Exposures
Increase Sales! Absolutely, each and every sale will increase an agency’s E&O exposures. No question exists about this fact. The more surgeries a surgeon does, the more medical malpractice exposures he/she will have. In other words, to have a thriving agency, one has to accept the risk of ever-increasing E&O exposures. The goal should be that, with practice making near perfection, the exposure on any given account actually decreases with more sales.
This decrease is not happening for many agencies and producers. The scary part, as I have witnessed in teaching coverages and performing E&O audits, is how many producers are often so poorly educated they would actually buy what they sell. They have so little knowledge of the inadequacy of what they are selling, they actually think the coverages offered ARE adequate, even when the gaps are big enough for 18-wheelers to clear side by side.
No one needs inadequate coverage, but people buy inadequate coverage in mass from ignorant and inadequately educated agents every day for two reasons. First the public does not get enough offers from knowledgeable agents. It is twiddle dee and twiddle dumb. I can buy from this inadequate agent or that inadequate agent. Really, qualified agents are not knocking on their doors.
Message to quality agents: This means the opportunities are awesome!
The second reason people buy inadequate coverage is they do not know any better. They have never had anyone take the time to explain why they need this amount or kind of coverage. I love the Allstate commercials regarding the dangers of buying cut rate insurance. I wish more such commercials were advertised from more carriers. I wish the commercials went even further to resonate more scarily with the public of the financial doom that occurs with cut-rate insurance rather than just bumps and bruises and anger. Tell the stories of the kids who are permanently injured and whose parents chose not to buy adequate limits. Tell the stories of the retirees who did not buy enough coverage on their homes because some agent told them they only needed 80% and completely failed to discuss ordinance and law resulting in the retirees having to pay 50% of the rebuild out of their life savings. Tell the story of the business that had to lay off all of its employees after a fire because the agent did not sell them the correct business income coverage.
People buy cut-rate insurance because they don’t know their options or how different policies provide different coverages. Con men and con carriers take advantage of the people’s lack of knowledge. If all insurance is the same, then don’t look for the coverage shortages in our policies – just look at our lower price. It is as easy as all get out to offer lower prices if the coverages are poor!
Agents then exacerbate the situation, often at the instruction of E&O people, by telling insureds, “It is your duty to read your policy.” This is like the snake oil salesman saying, “Drink this. It’ll cure you and won’t poison you. But read the label to be sure.” In order to read the label of a typical prescription to have any idea if the elixir will cure, will poison, or is just expensive sugar water one needs degrees in medicine, chemistry, and biology. People need someone that lives in the insurance world to read and explain insurance coverage to them.
Agents making money selling inadequate coverage could probably continue doing so for a long time if it was not for technology. Technology is not going to be the FDA of coverage police. Instead, insurance technology is clearly aimed at expanding the prevalence of inadequate coverage. Many purveyors of InsurTech insurance have distributor business models based on selling inadequate coverage because it is far easier to scale inadequate coverage sales versus having conversations with actual people regarding their coverage needs.
What will change though is that selling inadequate coverage using technology is much, much cheaper than selling inadequate coverage with humans. Humans selling inadequate coverage have a much shorter shelf life than humans selling coverages policyholders truly need. Using technology, even bots, to sell insurance at 7% commission is feasible, with profit to spare. Agents selling inadequate coverage, whether they know they are or not, are going to lose their jobs to software algorithms that don’t have families to feed and can therefore work for much lower wages than they can.
Algorithms and bots may have another advantage: They may have such a low standard of care that from an E&O perspective, they have no E&O exposure. Algorithms and bots will, without question, win the race to the bottom.
No one is really even trying to race to the top. Aiming for quality might be lucrative, even if it means taking on more E&O exposures.
NOTE: The information provided herein is intended for educational and informational purposes only and it represents only the views of the authors. It is not a recommendation that a particular course of action be followed. Burand & Associates, LLC and Chris Burand assume, and will have, no responsibility for liability or damage which may result from the use of any of this information.