1. Agency Operations

2. Learning Objectives We will review the learning objectives at the beginning of the section in which they are found

3. Section 1: The Insurance Agency

4. The Insurance Agency 1.Explain the different factors that affect how an agency distributes its products and provides customer service 2.Differentiate between an agent and a broker 3.Explain the standard of care an agent owes to its insurance companies 4.Explain the standard of care an agent owes to its customers 5.Identify the potential stakeholders of the insurance agency

5. The Primary Function of An Insurance Agency is to Sell Insurance Coverage and Provide Other Fee-Based Services Primarily A Sales Oriented Business But Service Driven as Well The Insurance Agency

6. Distribution is Affected By: –Number of Employees –Single or Multiple Locations –Local, Regional or National or International Operations –Area(s) of Specialization (if any) –Agency Management System(s) Used –Use of Service Centers LO The Insurance Agency

7. Sources of Income/Revenue –Commission New and Renewal Personal Lines, Commercial Lines, Life, Health & Disability, Employee Benefits –Fee-Based Services –Profit Sharing Bonuses –Investment Income The Insurance Agency

8. Overview of Positions Within the Agency –Producer/Agent –Broker –Customer Service Representative –Other The Insurance Agency

9. Positions Within the Agency –Producer/Agent Required to have a license, issued by the department of insurance, which authorizes the agent to transact insurance Identifying prospects, making sales calls, presenting solutions, securing the buying decision, collecting premium, and binding of coverage LO The Insurance Agency

10. –Producer/Agent Acts on behalf of the insurance company What the agent knows, the company knows LO The Insurance Agency

11. Positions Within the Agency –Broker Required to have a broker’s license issued by the department of insurance Many of the responsibilities are identical to those of an agent except a broker does not usually have binding authority A broker acts on behalf of the buyer/customer LO The Insurance Agency

12. Positions Within the Agency –CSR Customer Service Agent (CSA), Account Representative, Account Executive or Account Manager Responsible for providing information, advice, and service to customers during and after the insurance transaction Responsible for the day-to-day operation of an agency The Insurance Agency

13. –CSR Responsibilities may also include sales such as cross-selling and account rounding May be required to be licensed as an agent (or producer) as duties frequently fall under “transacting” insurance Size of the agency will dictate level of responsibility and specialization The Insurance Agency

14. Positions Within the Agency –Other Accounting Administration/Management Claims Loss control Risk management The Insurance Agency

15. Licensing Requirements Agent/Producer –Resident License to transact insurance in the state where the agent resides –Non-resident License to transact insurance in a state or jurisdiction in addition to the one in which the agent lives

16. Licensing Requirements Agent/Producer –Prelicense Education Education that must be completed before a person can take the agent’s examination –Continuing Education Education that must be completed in order to renew an agent’s license

17. Standard of Care Owed To Insurance Companies –Loyalty –Good Faith –Reasonable Care –Contractual Duties LO The Insurance Agency

18. Standard of Care Owed To Customers –Adequate Coverage –Proper Coverage –Coverage Placed in Their Best Interest –Prompt Communication –Coverage Placed With a Financially Sound Insurance Company LO The Insurance Agency

19. Resources The National Alliance IRMI Insurance Journal Agent and Broker Rough Notes National Underwriter Company National Association of Ins. Commissioners National Association of Insurance Women Knowledge Is Power

20. Stakeholder People who have the potential to be affected by any action taken by an organization. Any group or individual who is affected by achievement of a firm's objectives

21. Stakeholders Agency Owners Board of Directors Managers and Employees Customers Insurers Vendors Government Industry Associations LO

22. Section 2: The Insurance Marketplace

23. Learning Objectives 1.Explain the regulation of insurance companies 2.Explain the differences between admitted and non-admitted insurance companies 3.Explain the characteristics of an excess and surplus lines agent/broker

24. Learning Objectives 4.Explain the importance of the financial status of a company 5. Explain the differences between treaty and facultative reinsurance and the importance of reinsurance to the agency 6. Identify and describe the other markets including Lloyd’s of London, excess and surplus lines, and government programs/pools

25. The Insurance Marketplace Insurance Companies –Regulated at state level by Insurance Commissioner, Director of Insurance, etc. –The primary purpose of regulation is to protect the consumer LO

26. The Insurance Marketplace How Insurance Companies Are Formed –Stock company Owned by the stockholders Objective is profit for the stockholders –Mutual Company Owned by the policyholders Goal is to provide insurance at or near the actual cost of doing business

27. The Insurance Marketplace Admitted –Authorized and licensed to do business in the state LO

28. The Insurance Marketplace Non-admitted –Accessed through excess or surplus lines broker –Coverage cannot be placed with a non- admitted carrier unless a due diligence effort has been made to place coverage in an admitted market –Not protected by the Guaranty Fund LO

29. The Insurance Marketplace Non-admitted is not business as usual –Binding authority –Minimum premium –Minimum earned premium –One-way audits –Non-standard forms LO

30. The Insurance Marketplace Excess & Surplus Lines Agent/Broker –Places coverage with non-admitted insurer on behalf of the agent –Appointed by non-admitted insurer to Solicit sales from agencies Write insurance Collect premium Collect surplus premium taxes LO

31. The Insurance Marketplace Excess & Surplus Lines Agent/Broker –Monitors the financial condition of the insurance company (Insurance Departments have that responsibility for admitted companies) –Does not usually have binding authority LO

32. The Insurance Marketplace Regional or National –Where does the insurance company do business? –Are they familiar with the issues specific to your geographic area?

33. The Insurance Marketplace Financial Rating –Important to monitor so that the consumer is not negatively affected by the company’s inability to meet its financial obligations such as paying claims and returning unearned premiums –Financial data is filed with the state insurance departments annually LO

34. The Insurance Marketplace Financial Rating –Rating organizations can also provide financial information about an insurance company –Resources A.M. Best Dun & Bradstreet Standard & Poors NAIC LO

35. The Insurance Marketplace Reinsurance Company –The insurance company’s “insurance company” Reinsurance A process involving the transfer of risk from one insurer to another insurer LO

36. The Insurance Marketplace Reinsurance Company –Treaty Reinsurance The ceding company agrees to cede certain classes of business to the reinsurer as described in the treaty The reinsurer agrees to accept ALL business qualifying under the treaty LO

37. Treaty Reinsurance Example ABC Insurance Company has a treaty with XYZ Reinsurance Company According to their treaty, ABC is required to “cede” to XYZ (reinsure) liability limits over and above $1,000,000 on every personal auto policy ABC writes. ABC pays a portion of the premium to XYZ for this transfer of risk.

38. The Insurance Marketplace Reinsurance Company –Facultative Reinsurance Each exposure that the ceding company wants to reinsure is offered to the reinsurer on an individual basis It is individually underwritten and individually priced LO

39. Importance of Reinsurance to the Agency –The treaty an insurance company has with its reinsurer is a factor that must be considered when an underwriter is evaluating a risk for acceptance and pricing. LO The Insurance Marketplace

40. Importance of Reinsurance to the Agency –Personal lines can be affected by the limitations (coverage limits, values in unprotected locations, etc.) as the insurance company may be unable to provide coverage because reinsurance would not be in place. Reinsurance may be the reason for the limitation of binding authority. LO The Insurance Marketplace

41. Importance of Reinsurance to the Agency –Commercial lines can be affected by both coverage limitations and pricing. If reinsurance is required on a risk that falls outside of the scope of the treaty, pricing and coverage availability can be affected. The underwriter must include a premium charge for the reinsurance. LO

42. The Insurance Marketplace Lloyd’s of London –Market for difficult to insure risks as well as unique or unusual risks –How it works LO

43. The Insurance Marketplace Managing General Agent (MGA) –Wholesale intermediary –Represents one or more insurers –Accepts business on behalf of his/her principal within mutually agreed guidelines –Authority to appoint retail agents within a specific geographic area LO

44. Managing General Agent Agencies Insureds Insurer A Insurer B Insurer C

45. The Insurance Marketplace Government Ins. Programs/Pools –Private sector may avoid writing risks that fall outside of their underwriting criteria or are catastrophic in nature –In response, the government may establish insurance programs or pools as a way to make insurance available LO

46. The Insurance Marketplace —Caution— Agents do not typically have binding authority for Government Insurance Programs and Pools Important to understand underwriting criteria, binding authority (if any), and problems associated with incomplete or incorrect applications

47. The Insurance Marketplace Auto Assigned Risk Fair Access to Ins.Requirements (FAIR) Wind & Hail Pools National Flood Insurance Program Workers’ Compensation Assigned Risk Federal Crop Insurance (FCIC) LO

48. Section 3: Basics of Risk Management

49. Learning Objectives 1.Identify and explain the five steps in the risk management process 2.Identify and describe the four major classes of exposure 3.Identify and describe the methods used to identify exposure to loss 4.Given a specific situation, determine the risk control technique to apply

50. Risk Management The purpose of risk management is to protect the customer’s assets through the identification and analysis of exposures, controlling the exposures, financing of losses with internal and/or external funds, and the implementation and monitoring of the risk management process.

51. Risk Management 5-Steps Risk Identification Risk Analysis Risk Control Risk Finance Risk Administration LO

52. Risk Management The most important step is identification because an unknown exposure is unable to be analyzed, controlled or financed.

53. Risk Management Major Classes of Exposure to Loss Property –Buildings, homes, personal property, business property, equipment, intellectual property, etc. LO

54. Risk Management Major Classes of Exposure to Loss Liability –Bodily injury, property damage, personal injury, hold harmless agreements, etc. LO

55. Risk Management Major Classes of Exposure to Loss Loss of Income/Loss of Use –Loss of use from dependent properties, extra expense, loss of rental value, additional living expenses, etc. LO

56. Risk Management Major Classes of Exposure to Loss Human Exposure –Disability, long-term care, life insurance, key person, employee benefits, employment practices, etc. LO

57. Risk Management: Identification Interview Checklist, Survey or Questionnaire Physical Inspection Activity Analysis Advertising/Website Document Review Other –Flowchart –Loss History –Financial Statements LO

58. Risk Management: Analysis Measuring Exposure to Loss Frequency –How often Severity –How much? Points to Remember

59. Risk Management: Control Avoidance –Don’t own certain property or engage in an activity Loss Prevention –Reduces frequency Loss Reduction –Reduces severity LO

60. Risk Management: Control Duplication/Separation –Reduces severity Combination –Using more than one risk control technique LO

61. Risk Management: Finance Retention Or Transfer

62. Risk Management: Finance Active Retention –Customer knows Passive Retention –Customer doesn’t know until after the loss Insurance Transfer Non-insurance Transfer –Contractual such as hold harmless

63. Risk Management: Administration Monitor Make Changes When Needed POD

64. Section 4: Communication Skills

65. Learning Objectives 1.Identify and explain the three communication skill areas: Listening, Oral and Written 2.Identify and explain the 3-step process in proofing written communication

66. Critical component of agency-customer relationship Methods –Face-to-face –Telephone –Written correspondence Communication Skills

67. Two-way communication is the most effective way to get your message across LO

68. Message Re-delivered Message Spoken Message Received InterpretationResponse Clarification Two-Way Communication

69. Communication Skills Verbal vs. Non-verbal –Face-to-Face 55 percent of what the listener “hears” is determined by the speaker’s body language 38 percent from tone of voice 7 percent from words actually spoken LO

70. Communication Skills Verbal vs. Non-verbal –Telephone Communication 86 percent of what the listener “hears” is determined by the speaker’s tone of voice 14 percent from words actually spoken LO

71. Communication Skills Non-Verbal –Proximity –Eye Contact –Facial Expressions –Physical Contact –Smell LO

72. Communication Skills Verbal –Volume of Speech –Pleasant Voice –Avoid Industry “Jargon” LO

73. Communication Skills Written –Use standardized letters or memos LO

74. Communication Skills Proofing –Content –Grammar –Appearance Email LO

75. Communication Skills Proofing: Content –Information accurate? –Message clear? –Avoided “jargon”? –Organized? –Written to reader’s level? –Reader know what is expected? –Does reader know when information is needed? –Avoided language that could create an E & O exposure? –Disclaimer LO

76. Communication Skills Proofing: Grammar –Spell check should not be the only tool –Look at punctuation –Other grammar issues Subject-verb agreement Possessive nouns LO

77. Communication Skills Proofing: Appearance –How does it look? –Is it spaced correctly? –Are the margins correct for the length of the message? –Is the font professional in appearance and easy to read? LO

78. Communication Skills Email –Formal communication –Discovered in court of law –Maintain professional appearance –Disclaimers –Out of office message –Message of no binding LO

79. Section 5: Basics of Financial Statement Analysis

80. Learning Objectives 1.Explain the use of financial statements as a part of the underwriting process 2.Explain the purpose and components of a balance sheet and a profit & loss statement

81. Basics of Financial Statement Analysis The financial condition of an insured is an important piece of the underwriting process –Direct relationship between financial condition and loss experience –Automation makes it easier for customers to provide financials –Confidentiality important LO

82. Basic Tools –Balance Sheet –Income and Expense Statement –Direct Bill, Account Current or Premium Finance Basics of Financial Statement Analysis LO

83. Balance Sheet –Assets What is Owned –Liabilities What is Owed –Equity Assets Minus Liabilities Basics of Financial Statement Analysis LO

84. Balance Sheet –Statement of financial condition on a given date –A snapshot of one moment in time Basics of Financial Statement Analysis LO

85. Income and Expense Statement (Profit and Loss Statement) –Summarizes financial results over a period of time –A movie with a beginning, middle and end Basics of Financial Statement Analysis LO

86. Income and Expense Statement (Profit and Loss Statement) –Determines profit or loss –Shows the revenues –Shows the expenses incurred to generate the revenues LO Basics of Financial Statement Analysis

87. Income and Expense Statement (Profit and Loss Statement) –Revenues Minus Expenses = Profit or Loss –Analyze statements for the past 3 to 5 years to identify trends LO Basics of Financial Statement Analysis

88. Direct Bill, Account Current or Premium Finance Direct Bill –Direct Bill Agency may be responsible for collecting the initial premium Insurance company is responsible for sending premium billings to the insured and for sending late notices/notices of cancellation Basics of Financial Statement Analysis

89. Account Current –Agency is responsible for collecting the premium and forwarding the net premium (gross premium less commission) to the insurance company –Premiums are held in a fiduciary capacity Basics of Financial Statement Analysis

90. Account Current –Insurance Company issues a monthly statement –Net premium is due the company even if the insured has NOT paid the premium to the agency –Agency has to request the company to cancel the policy if premium is not paid Basics of Financial Statement Analysis

91. Premium Finance –Finance agreement is submitted to the premium finance company along with the required down payment and any outstanding payments –Finance agreement allows the premium finance company to request cancellation in the event premiums are not paid by their due date Basics of Financial Statement Analysis

92. Remember... –You don’t sell a policy, you sell coverage –Premium arrangements should be made at the time coverage is bound –Options Direct Bill Paid in Full Premium Finance Basics of Financial Statement Analysis

93. Section 6: Personal & Commercial Lines: Due Diligence and Account Management

94. Learning Objectives 1.Explain the role of underwriting guidelines, including exceptions 2.Explain the guidelines for effective documentation 3.Explain the steps in account servicing for new business and policy services

95. Personal & Commercial Lines Due Diligence & Account Management Know coverage differences among the policies available in your agency –“Best terms available” –Differences in perils, special limits, limits of liability, additional coverages, etc.

96. Personal & Commercial Lines Due Diligence & Account Management Understand underwriting requirements –Indicator of type of business company interested in writing or not writing –May not always agree with them, but they are what they are –Review underwriting guidelines periodically to stay aware of changes LO

97. Personal & Commercial Lines Due Diligence & Account Management Understand underwriting requirements –Know your binding authority –Majority of new business submitted should meet or exceed the underwriting guidelines LO

98. Personal & Commercial Lines Due Diligence & Account Management Understand underwriting requirements –Some underwriting guidelines are non-negotiable –Underwriting exceptions –Know the company’s appetite and additional services available LO

99. Credit Scoring –Credit scoring is widely used as part of the underwriting process. –Each state can individually regulate the use of credit scoring –It is important for insurance professionals to understand and follow their state’s laws or rules regulating this issue. Personal & Commercial Lines Due Diligence & Account Management

100. Application to Policy –Application should be completed thoroughly, accurately and honestly Correct person(s) or entity as named insured Underwriting questions asked of and answered by the named insured Personal Due Diligence & Account Management LO

101. Personal & Commercial Lines Due Diligence & Account Management Application to Policy –Could be a problem with coverage if information on the application is found to have been incorrect –Have named insured sign the application even if a signature is not required –Application may be completed by the producer and/or the CSR LO

102. Personal & Commercial Lines Due Diligence & Account Management Application to Policy –Agency should never sign for an insured –Make sure the application is completely filled out including marking boxes that trigger coverage LO

103. Personal & Commercial Lines Due Diligence & Account Management Additional Information –Loss runs –Supplemental applications –Financials –Photos –Copies of advertising/website –Driver’s list –Narrative LO

104. Personal & Commercial Lines Due Diligence & Account Management Application to Policy –Document customer’s records with regard to any rejection of coverage, selection of reduced limits, etc. –Documentation LO

105. Guidelines for Effective Documentation: Made in the agency management system according to the agency’s policies and procedures More effective to use a “free form note screen” format rather than input areas that require exact information LO

106. Guidelines for Effective Documentation: Made immediately after the event creating the need for documentation has taken place Should consist of “just the facts”; free of editorial or emotional comments Documentation can be “discovered” in an errors and omissions lawsuit LO

107. Personal & Commercial Lines Due Diligence & Account Management Application to Policy –Issue necessary binders, certificates of insurance, evidence of property insurance, identification cards, receipt, etc. LO

108. Personal & Commercial Lines Due Diligence & Account Management Application to Policy –Upload the application within the required time frame –Set a follow up for the issuance of the policy LO

109. Personal & Commercial Lines Due Diligence & Account Management Application to Policy –When the policy is issued, verify that it was issued correctly –The time to discover an error is before a loss occurs! LO

110. Personal & Commercial Lines Due Diligence & Account Management Account Servicing: Changes –Verify the person requesting the change is the named insured –Ask the insured for all of the information necessary to make the change –Verify the insurable interest of the property being added LO

111. Personal & Commercial Lines Due Diligence & Account Management Account Servicing: Changes –Advise the insured when they will receive verification of the change from the insurance company LO

112. Personal & Commercial Lines Due Diligence & Account Management Account Servicing: Changes –Request endorsement from the insurance company –Make changes to the customer’s policy information in the agency management system –Use the contact to cross-sell or account develop! LO

113. Personal & Commercial Lines Due Diligence & Account Management Account Servicing: Changes –Document customer’s records –Mail policy change confirmation to insured –Set a follow up for the endorsement to be processed –Verify endorsement was issued correctly Claims Servicing Covered Later LO

114. Personal & Commercial Lines Due Diligence & Account Management Renewals –Generate renewal list 90 to 120 days prior to renewal –Meet with producer to discuss the account and determine who will get updated information –Areas to update information

115. Personal & Commercial Lines Due Diligence & Account Management Renewals –Discuss with insured any changes or new coverages available –Complete renewal application and submit to company

116. Section 7: Other Account Servicing Issues

117. Learning Objectives 1.Explain the differences between a Certificate of Insurance, an Evidence of Property Insurance form, and a Binder 2.Explain the importance of inspections and recommendations 3.Explain how a service center works

118. Other Account Servicing Issues Certificate of Insurance –Informational purposes only –Not a contract or legal document and it does not give any right to the certificate holder –Does not amend, extend or change the policy –Forward certificate to insurance company LO

119. Other Account Servicing Issues Evidence of Property Insurance –Evidence that insurance is in force –Issued for information purposes only –Not a contract or legal document and does not give any rights to the certificate holder –Does not amend, extend or change the policy LO

120. Other Account Servicing Issues Binder –Temporary insurance contract –Issued when coverage is bound and the agency either has binding authority or received permission from the insurance company to bind coverage –Issued by person authorized in the agency LO

121. Other Account Servicing Issues Binder –Use policy language and terminology –Must comply with state laws regarding content of the binder LO

122. Other Account Servicing Issues Binder –ACORD is the standard form; language should not be amended without the approval of the insurance company –Reverse side of the binder contains important language and should be included with every binder issued LO

123. Other Account Servicing Issues Binder –Forward copy of the binder to the insurance company –Follow up to make sure coverage was either replaced by a policy or notification was sent to the insured advising that all coverage was no longer in force LO

124. Other Account Servicing Issues Cancellation Request/Lost Policy Release –Obtain the right signature –Include the time the cancellation is to be effective

125. Other Account Servicing Issues Additional insured and additional named insured requests –Determine the interest of the individual or entity being added –Make sure the named insured understands how this could affect coverage in the event of a claim

126. Other Account Servicing Issues Inspection and Compliance Required –Purpose is to identify hazards, verify operations, establish property values, determine fire and life safety protection, etc. –Insurance companies may use staff or outsource LO

127. Other Account Servicing Issues Inspection and Compliance Required –In some instances, coverage may not be bound until inspection has been made and it is found to meet underwriting approval –Suggested: insured’s discretion –Mandatory: must be satisfied LO

128. Other Account Servicing Issues Proposals –Professionally written format –Summarize the coverage using policy language with disclaimer –Include information about the agency –More than a premium quote

129. Other Account Servicing Issues Lack of a Market –Due diligence effort –Don’t promise that coverage can be placed –Don’t “down play” the seriousness of a non-renewal or cancellation Diligence: Continual effort to accomplish something

130. Other Account Servicing Issues Lack of a Market –If coverage cannot be found in an admitted market, the non-admitted market may be used –If coverage cannot be found, customers should have enough notice as to allow them to locate coverage elsewhere

131. Other Account Servicing Issues Using Service Centers –Used to transfer the servicing to the insurance company’s service center –Typically personal lines and small commercial –Agency’s goal is to remove servicing responsibilities to allow time for sales or to reduce personnel LO

132. Other Account Servicing Issues Using Service Centers –Send customers a letter which includes the toll free number and the benefits they should expect –Inquiries falling outside of the scope of services to be provided are forwarded to the agency –Contract should outline scope of services LO

133. Other Account Servicing Issues Using Service Centers –Procedures should be in place as to notification of new sales, claims, etc. –Retention should be monitored –Maintain central log LO

134. Section 8: Claims Processing

135. Learning Objectives 1.Explain the steps in claims processing 2.Explain the purpose of a Claims Log

136. Claims Processing Insured Reports the Claim –Complete ACORD form –Be sensitive to privacy issues –Record accurate information “Just the Facts” LO

137. Claims Processing Insured Reports the Claim –Do not leave any section blank “N/A” vs. “None” –Understand that most people have not experienced a loss previously and are unfamiliar with the claims process LO

138. Claims Processing Insured Reports the Claim –Do not indicate whether the loss is covered or not covered –Advise customers of their responsibilities (PINES) –Let the customers know what to expect next LO

139. Claims Processing Insured Reports the Claim –Send the customer a claims acknowledgement letter –Notify producer, supervisor, management, etc., of large losses, questionable losses or losses with coverage in question LO

140. Claims Processing Report the Claim to the Company –Immediately report the claim –Policy conditions typically require the insured to promptly report the loss LO

141. Claims Processing Report the Claim to the Company –Failure of the agency to report the loss could create an errors and omissions exposure –Unfair Claim Practices statutes or regulations may require the agency to report all losses even if the insured does not want it reported LO

142. Claims Processing Direct Reporting –Insured reports the claim to the insurance company –When is the agency notified of the loss? LO

143. Claims Processing Claims Log –Maintain on agency management system –Use it to provide: Claims count Number of open claims Time between first notice and closure LO

144. Claims Processing Claims Log –Review regularly to identify loss trends or loss ratio issues –Compare to insurance company’s loss ratio reports for accuracy LO

145. Claims Processing Other Claims Issues –When the claimant reports the claim –Privacy issues –Confidentiality –Reservation of rights letter –Suit and Summons –Claims survey

146. Section 9: Professional Responsibilities: Ethical and Legal Behavior

147. Learning Objectives 1.Identify the four benefits of ethical behavior 2.Explain the difference between statutes, oral and written agreements, and peer standards 3.Explain the differences between actual, implied and apparent authority 4.Explain the common causes of claims made against agents by insureds and insurance companies

148. Professional Responsibilities: Ethical and Legal Behavior Ethics... A discipline dealing with good and evil and with moral duty; moral principles or practice A set of rules, based on a set of principles or values that we accept as truths and that govern our behavior

149. Why Be Ethical? – Social Responsibility –Avoid of Public Criticism –Avoid Government Regulation –Enhance Your Credibility With Customers and Companies Professional Responsibilities: Ethical and Legal Behavior LO

150. “Excuses” for Unethical Behavior “Everyone is unethical at one time or another; therefore, it is no big deal. Everybody does it.” “Nothing too serious will happen if I get caught.” “I will do what I have to do to make the sale.”

151. “Excuses” for Unethical Behavior “If I don’t get the policy written, my bonus is out the door.” “It’s not really hurting anyone.” “I’ll change it/fix it later.” “I thought it was okay to do.” Training Issue

152. Vehicle UsageProtection Class Property Values Other Residents in the Household Young Drivers in the Household Rate Basis, Classification or Garaging Address Signing for an Insured

153. Incorrect Rating = Unprofitable Business Risk is intentionally misrated in order to write the coverage. Insurer does not receive the written premium for the exposure on which the rates were predicated. Therefore, insurer does not receive the earned premium for the exposure necessary to pay for the losses it predicted would occur. Resulting in Unprofitability/Poor Loss Ratio

154. Questions to Ask How would I feel if the facts surrounding my conduct or decision appeared on the front of the local newspaper? How would I feel if I had to explain my actions to my friends and family? How would I feel if someone took the same action with a member of my family? Will I be able to look myself in the mirror tomorrow morning? Is it legal?

155. Legal Duties Are Based On: –Peer Standards –Oral or Written Agreements –Statutes LO Professional Responsibilities: Ethical and Legal Behavior

156. Act Within Your Authority –Actual or Expressed –Implied –Apparent LO Professional Responsibilities: Ethical and Legal Behavior

157. Actual or Expressed –Actual authority is expressly given by the insurance company as found in the agency contract or agreement LO Professional Responsibilities: Ethical and Legal Behavior

158. Implied –Must first have Actual or Expressed authority –Principal (insurance company) has allowed the agent to have the appearance of authority; –Authority through estoppel; or –Authority through custom and usage LO Professional Responsibilities: Ethical and Legal Behavior

159. Apparent –Customer believes the agent has the authority –Protects the insured from unauthorized acts of the agent –Such acts may bind the insurance company; however, it may subrogate against the agent LO Professional Responsibilities: Ethical and Legal Behavior

160. Errors and Omissions Claims Agents Can Be Sued By Insureds and Insurance Companies Professional Responsibilities: Ethical and Legal Behavior

161. Common Causes of Claims Made Against Agents By Insureds –Failure to obtain proper coverage –Failure to place coverage after agreeing to it –Failure to give proper advice –Failure to advise insured promptly of rejection or lack of coverage LO

162. Professional Responsibilities: Ethical and Legal Behavior Common Causes of Claims Made Against Agents By Insureds –Failure to renew coverage –Failure to service policies –Failure to place on best terms available –Misrepresentation LO

163. Professional Responsibilities: Ethical and Legal Behavior Common Causes of Claims Made Against Agents By Insureds –Placing with an insolvent insurer or unauthorized insurer –Modification of established service to customers –Making a clerical error LO

164. Professional Responsibilities: Ethical and Legal Behavior Common Causes of Claims Made Against Agents By Companies –Exceeding binding authority and/or underwriting authority –Failure to notify carrier of material change in risk –Misrepresenting the risk –Delay in forwarding loss information LO

165. Contributors to E & O Claims Contributors to E & O Claims Lack of Product Knowledge Lack of Consistent Procedures Lack of Documentation

166. Agency Defense Activities –Don’t wait before preparing –Report the claim to your E & O Carrier –Assign one person to act as claims coordinator Professional Responsibilities: Ethical and Legal Behavior

167. Agency Defense Activities –Hold a staff meeting including all involved agency personnel Discuss the situation in general Have each person briefly describe their involvement and in writing Professional Responsibilities: Ethical and Legal Behavior

168. Agency Defense Activities –Coordinator gathers all pertinent information into a master file and prepares a chronological written narrative –Remind all to maintain confidentiality Professional Responsibilities: Ethical and Legal Behavior

169. Agency Defense Activities –Prepare to be a good witness –Do not change any operating procedures afterwards without approval of your E & O Carrier –Let the agency staff know the results Professional Responsibilities: Ethical and Legal Behavior

170. Questions...

171. Agency Operations