BINDING AUTHORITY
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Establishing good working relationships and a mutual plan for success with your present insurance markets will go a long way in reducing your E&O exposure. Insurance companies are becoming more selective regarding the number and types of agencies they want to deal with. If a company knows that your agency actively practices E&O prevention proceedures, you will be at the top of their list. They like to see easy to read complete submissions and applications, knowledgeable staff who are successful in writing the type of business the insurance company is interested in writing, etc. It is best to deal with companies that you have complete faith in so that you can work with them should a situation arise. It is extremely important for your agency to choose and know the companies that you deal with.
Does your Agency:
1.
Have an established minimum financial criteria for carriers to be used by the agency? (i.e. minimum A.M. Best''s rating?)
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Annually review the financial ratings of the companies your agency currently deals with?
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Deal with non-admitted carriers? If so, are the licensing and regulatory requirements for placing coverage with non-admitted carriers communicated to all staff that are permitted to do these placements?
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4.
Deal with un-rated entities, such as Risk Retention Groups, METs, MEWAs, or Self-Insured Trusts?
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a.
If so, do you provide the client with all financial information you have available on the entity?
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b.
Do you require the client to sign a statement acknowledging they have received the financial information and are aware of the differences between this entity and an admitted insurer?
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5.
Have a master list outlining the companies (especially wholesalers, excess and surplus lines) you want your staff dealing with profiling their:
Specialties, binding authorities / limits, terms and conditions, any special items of interest
(eg. ABC Insurance wants all endorsement requests phoned in).
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6.
Ask your carrier about any unique or unusual coverage enhancements or limitations contained in their products and make sure the agency understands its binding authority. To expand your employees' product knowledge and help avoid gaps in coverage contact your local state association for classes/seminars on all types of coverage which often include continuing education credits.
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7.
Determine and communicate if your agency will deal with Sub-Agents.
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If you determine that you will, provide a protocol to follow (i e. Must be approved by management, must follow all new business rules, etc.).
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Require all sub-agents to provide proof of errors and omissions coverage on annual basis?
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If an E&O claim were to happen as a result of something their office did, your agency may be held liable.
By limiting the number of carriers your agency works with you can reduce your E&O exposure because:
Your staff has less information to remember.
Your agency may be more closely involved with a smaller number of companies resulting in stronger relationships.
Employees cannot write "everything that walks through the door" (especially risks they are unfamiliar with) if there is not a market for it.
IMPLEMENTATION CHECKLIST - BINDING AUTHORITY
Identify the areas you feel need improvement:
Notes:
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