What are the Common Lawsuits Insurance Agents Face?

insurance agents

Insurance agents are only human, but the simple errors and omissions that humans sometimes make can result in a lawsuit when you’re in the insurance industry. While agents need to ensure their clients have the correct coverage, it is equally important that they are covered themselves. Here are six common reasons for errors and omissions claims against insurance agents:

Insufficient Coverage

Clients place trust in their agent’s ability to monitor their insurance and ensure their financial health is secured. If a client finds coverage is insufficient in the event of a loss, legal action may be pursued. The following steps can help to avoid this situation:

  • Vet every client
  • Notify the client immediately if their requests for coverage cannot be met
  • Document all conversations and interactions
  • Monitor financial solvency of insurer

Incorrect Explanation of Coverage

Sometimes clients claim they didn’t receive adequate explanation. Here’s how to protect against this issue:

  • Ensure clients understand policy terms before finalizing the purchase
  • Communicate changes in terms or premiums when policies are up for renewal
  • Update marketing materials frequently to ensure accuracy

Errors in Administration

One of the biggest causes of administrative errors is having multiple touchpoints in the processing of one policy. Communication errors multiply every time the information changes hands. A single agent should handle every portion of the process with each assigned client, from consultation to purchase and follow-up maintenance.

Overlooked Risk Exposures

Error and omission lawsuits frequently result from problems with risk analysis. When agents routinely demonstrate an inability to spot their clients’ risk exposure, further training may be needed. Some steps to take to remedy this issue include:

  • Evaluate risk analysis skills of new employees
  • Require courses in risk analysis for all employees
  • Compile resources to assist producers in evaluating risk

Policy Changes

The agent has a responsibility to communicate changes in policy coverage with the client. This could include anything from renewal notices to changes in the financial condition of the insurer that may impact its capability to continue the policy.

Inadequate Communication

There are three crucial avenues for information in an insurance business relationship:

  1. The agent to the client
  2. The client to the agent
  3. The agent to the insurer

To make sure the insurer is always kept up-to-date on client information, a routine should be established for the following:

  • Monitor claims: follow up with the client and insurer after a claim is filed
  • Monitor loss ratios: anticipate issues and required changes by watching industry patterns
  • Communicate all claims: when a client reports a loss, the first step is to ensure the information reaches a claims handler. The agent should track the claim to make sure it is processed quickly and accurately.

Insurance agents should always be properly insured themselves because mistakes happen. However, by following these intuitive steps to ensure accurate record-keeping and quality communication, agents can mitigate their risk of legal claims.

About Cochrane and Company

For more than six decades, Cochrane & Company has been proudly at the forefront of the insurance industry. Our experience has enabled us to innovate in powerful ways, reimagining the E&S market, and providing technology solutions that make it easy to do business with us. Licensed in all 50 states, we proudly serve clients across the nation, providing personalized and powerful solutions to help you become an even better partner for your clients. Speak to one of our experienced professionals today by calling (509) 462-1148.

Social Title: Common Causes of Lawsuits Against Insurance Agents

Social Description: Understanding the causes of error and omission claims can help insurance agents to mitigate their risk. Read for information on how agents can avoid common mistakes.

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