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The Rough Notes Company Inc.



September 28
08:51 2021

Inside Matters

By Mary M. Belka, CPCU, ARM, ARe, RPLU, CIC, CPIW


Complete and proper documentation matters

It can be most heartening to see the positive results of effective documentation in my work as an insurance agency E&O (errors and omissions) auditor. These examples of account managers who save the proverbial day with proper documentation are real, and reconstructing what made these positive outcomes possible is something agencies can quite literally take to the bank.

Does complete and proper documentation matter? In our world of contracts of adhesion and “he said, she said,” you decide.

Documentation “heroes”

An account manager in a very busy agency fielded a call from an insured looking for clarification regarding a particular coverage. Wearing a headset, she documented the conversation directly into the automated client file as it unfolded using the appropriate agency management system activity code, indicating to whom she spoke, what was discussed, and the result of the conversation.

[D]ocumentation is the record of what has occurred—it tells the story … . Documents are some of the components of that documentation; they are part of the story—but not necessarily the entire story.

Two years later, a $2 million E&O claim developed based on the subject of the call; and when deposed, the account manager said, “I don’t remember the exact phone conversation,” but described the procedure she would have followed to document that type of conversation, including the appropriate activity. She had in fact documented the file just as she described per the agency’s written procedures. On the strength of this documentation in deposition, the claimant dropped the suit. The insured had been advised by counsel to file the suit because “agencies don’t document.”

A producer wrote a new account for a client who had an existing additional insured endorsement requirement, which the new carrier agreed to replicate. When he checked the policy, the account manager discovered that the underwriter failed to include the endorsement on the policy. The account manager persistently called, sent reminders, and set suspenses to make certain the endorsement was added in order for a certificate of insurance to be issued. Four months later, both were still outstanding, despite the underwriter’s assurance that the endorsement would follow. Each conversation was documented with an email outlining that coverage was in place.

A serious injury occurred; the additional insured was named in the suit, and submitted a claim under the policy, which the carrier denied, stating there was no coverage. A $10 million E&O suit against the agency and the carrier resulted. The fact that the suit was brought in a joint-and-several-liability state made the case more perilous for the E&O carrier to take to trial, due to the high limits carried by the agency. Based on the quality of the documentation trail created by the account manager, the E&O carrier was able to undertake defense of the claim with confidence; rather than settling, they ultimately won summary judgment from the claim on behalf of the agency. Coverage was found to be in place under the policy for the additional insured; the carrier was left to pay all damages and defense costs.

A producer and account manager held a pre-renewal meeting with a client who had experienced several EPLI (employment practices liability insurance) claims, but had not yet purchased coverage. The insured declined yet again during the meeting to purchase the coverage. The account manager forwarded the agency’s standard procedure follow-up post-meeting email synopsizing the results of the meeting, including that this coverage had been declined.

Two months later, the insured called to report yet another EPLI situation, asking that the claim be reported to their carrier. The producer was able to provide the documentation outlining that there was no coverage in place, including the insured’s continued declination of the proposal for EPLI.

An E&O claim was averted; the insured ultimately purchased the coverage. Lessons learned:

  • Amnesia can set in when the insured receives a demand for $3 million!
  • A proposal signature page provides even better documentation of coverage accepted or declined—but the follow-up email held firm.

Much less dramatic, but still economically impactful, is the increase in profitability when agencies can operate seamlessly in a completely automated environment with fewer, well-trained and professional account managers whose documentation is consistent and complete. This is not possible where agency employees are not documenting within established agencywide documentation parameters. For example, agencies with consistent documentation procedures can more easily implement a primary/next available approach to incoming calls, for more effective handling.

Any qualified account manager can help any client 80% to 90% of the time, reducing the number of voicemails. Answering clients’ calls as they come in is more efficient for all concerned, and the agency can reach a level of efficiency and professionalism that can set it apart from its competitors. Proper documentation processes can help make this a reality.

Documentation and documents defined

Documentation is defined as “certification, credentials, records, or documents.” In our world, the variety of documents is broad and digital and can include policies, applications, forms, correspondence (including emails, letters, texts, and voicemail recordings), invoices, loss control reports, and much more. All are digital today. Bottom line, documentation is the record of what has occurred—it tells the story and records the history of agency transactions.

Documents are some of the components of that documentation; they are part of the story—but not necessarily the entire story. If the documentation is good enough, it is often not necessary to look at the underlying documents. Descriptive documentation is needed to tie documents to the story. Today, documents are largely stored as images that provide the backup for the documentation.

Trend toward living in images

As files have become digital, a disturbing trend has developed. The tendency to “live in the images” versus actually documenting the client file has become prevalent. The misguided view that documentation is the same as documents is at the core of this issue. In addition, many agencies do not use activities consistently, thereby giving up important management system reporting functionality.

Key word search functionality has resulted in the unfortunate shortcut of simply attaching documents at the client level, often without linking them to specific activities or policies. The document management folder becomes one big file drawer.

While this may save time at the point of attachment, it wastes time when the information is needed after the fact. It also reduces the ability to generate reports, especially if activities are not used with reporting in mind.

The more sophisticated use of activities to record and file documentation details and accompanying details helps to compartmentalize all that has transpired on a client file, making it easier for others to access this data when it is needed. More important, all components of a particular transaction can be linked together with most systems, rather than filed as a string of seemingly unrelated items. This makes it more likely that the full story is easily accessible and understandable, long after it has taken place.

Images are not data. It is not possible to run reports on data contained in images.

Speaking of activities

Nearly all agency management systems include activity codes that should be a “language” used consistently by all within the agency. Activities form the foundation for procedures as well. Another disturbing trend is that of some management system vendors steering agencies away from the use of activities—and instead suggesting that everything simply be attached in the document management area of the system. Again, while this “saves time” for the person originally attaching the item, it unfortunately reduces reporting options and impedes analysis of important data after the fact.

Increasing understanding of activities and how to use them more effectively in your particular system is yet another way to differentiate your agency and increase levels of efficiency as well as profitability.

One client file—the automated one

I often address the issue of producers becoming overly involved in servicing. Aside from the obvious inefficiencies this presents, another worry is the level of undocumented client interactions. Traditionally, producers do not properly document client files. Just last week, a producer indicated to me that he never uses the system and maintains his own information as needed—by him.

Aside from the duplication, this practice of maintaining separate files outside the agency management system decreases the effectiveness of service staff at best; and at worst, increases the potential for E&O when all who work with the client do not have access to all relevant documentation and data.

The one complete source for all client documentation should be the management system. Both producers and account managers should understand and follow all proper client file documentation procedures. This includes all text and email communication between producers and clients. These critical file components should not be omitted from the client file. Today’s best systems make this possible—it’s no longer rocket science!

Documentation matters!

Proper documentation of the client file is central to operational excellence—it doesn’t just happen, but rather requires planning, consistent procedures, discipline, and auditing for the best result.

The benefits are significant, including reducing the potential for E&O, increasing overall agency profitability, and providing a better experience for your clients.

The author

Mary M. Belka is owner and CEO of Eisenhart Consulting Group, Inc., providing management and operations consulting to the insurance industry. She also is an endorsed agency E&O auditor for Swiss Re/Westport. A graduate of the University of Nebraska, Mary holds the CPCU, ARM, ARe, RPLU, CIC, and CPIW designations.

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