Personal Lines Focus

MORE THAN HOME AND AUTO

Minimize agency errors and omissions claims by educating clients on personal risks

By Donna Gray

Personal lines insurance agencies routinely offer clients a wealth of knowledge in properly insuring assets. Most clients know they need home and auto insurance, but the truth is that they can often benefit from additional layers of coverage depending on their unique situations.

As insurance agents and brokers, it is crucial to assess each client and offer personalized coverage recommendations that limit gaps while minimizing the potential for agency errors and omissions (E&O).

Many agencies implement policies and procedures to limit in-house E&O claims, including documenting every interaction and securing signed declination forms if a client refuses a recommended policy. Agencies should regularly review these procedures with their staff.

In addition, it’s important to explore new and emerging trends in the personal lines market to stay ahead of the competition.

As things continue to change in the evolution of the coronavirus pandemic, what was considered adequate coverage pre-pandemic may not be enough to protect agencies and their clients today.

Let’s explore common personal lines coverage issues that agents should be reviewing with their clients to help them understand the insurance implications surrounding their lifestyle choices.

Employment Practices Liability Insurance (EPLI). Many clients rely on domestic staff to keep their homes and lives running efficiently. Whether it is a babysitter, house cleaner, personal assistant, landscaper, or pool cleaner, these valuable staff members leave room for potential lawsuits not covered by homeowners insurance. Some insureds may not fully understand the risks of hiring these services and may not be aware that they are considered “employees.”

To help educate clients, agents can share sample claims when describing the need for the coverage. Common claims include discrimination and wrongful termination. In addition, the rise of the #MeToo movement has caused an increase in sexual harassment claims that all individuals need to consider when hiring domestic staff. Even if the client is not at fault, they can spend thousands of dollars defending a lawsuit in and out of court.

Social media and cyberbullying. In a culture where screen use is ubiquitous, more and more children utilize electronic devices daily to access social media platforms and services. According to a study conducted by the Children’s Hospital of Chicago, 63% of parents said their teens’ social media use increased during the COVID-19 pandemic. In recent years, cyberbullying has become prevalent, leading to serious mental pain and anguish among victims.

It’s important that parents under-stand they can be held liable for their children’s actions on social media. If their child (or the parent) makes a statement on social platforms that offends or harms another individual, parents can be served with a libel or slander lawsuit. These incidents are not covered by the personal liability limit on their home insurance, which often excludes intentional acts or electronic aggression.

The best approach an agent can take is to educate clients on the potential outcomes and encourage them to play an active role in their child’s social media use. If a claim arises, clients should call their attorney first and then a public relations firm to begin a strategy for protecting the family’s reputation.

Personal directors and officers (D&O) insurance. One valuable question insurance agents should ask every client is if they serve on a board of any type. Often, board members think that they are protected as long as the organization carries D&O insurance. In reality, if the entire board of directors receives lawsuit papers, the members split the limits of liability on the organization’s policy.

For example, as more communities look to return to hosting in-person events such as summer camps, plays, or concerts, board members open themselves up to a new type of claim if COVID-related outbreaks occur at these hosted events. Every board member can benefit from having a personal D&O policy that exclusively protects them in the event of a lawsuit.

Calculating the “right” liability insurance limit. One of the most significant responsibilities that insurance agents have is helping clients choose the correct liability limits for their home, auto, and umbrella policies. Not every potential client understands the need for an additional policy, but agents should recommend no less than $1,000,000 in limits.

Calculating the proper limits starts with having a conversation and asking questions that encourage the individual to share valuable information about their lives. Some questions include:

• Can you tell me about your family?
• What types of property do you own?
• Are you likely to have a drink at a restaurant and drive home?

Once agents understand the client’s lifestyle, they can share why an umbrella policy is valuable. Comparing the cost of a policy to what they could lose is just the start. There is a common belief that lawsuits can’t take more than the person has in the bank. Explaining that, if found negligent, wages can be garnished well into the future is another powerful way to illustrate the potential severity of the risk.

Ensuring personal property in a trust or LLC. As more individuals try to mitigate risk, they place their house and property into a trust. However, once the home and property are in a trust, the policy, likely in the individual’s name, is null and void because the individual no longer owns the property. While it is an easy fix that requires the trust to be added onto the policy as an additional insured, this step can easily get missed.

Insurance agents should ask every new and existing client upon renewal if they have established a trust so updates can be made to the policy.

Rental car insurance. Now that travel is returning across the United States; many are renting cars at their destinations. Most insureds know that all expenses related to a damaged rental car may not be covered by their auto insurance policy, but it is a common myth that rental car insurance is provided through all credit card companies. While that may be true for some, not every credit card company offers this coverage.

Insurance agents have the opportunity to educate clients on this myth and guide them to where to find adequate coverage. One resource agents can use is insuremyrentalcar.com, which makes it easy for clients to access coverage quickly and saves agents time explaining why a claim isn’t covered after an incident.

Having a conversation with clients every year, paired with a renewal checklist, is one of the best strategies any agency can implement and add to their agency procedures as a recurring task, so no account gets overlooked.

Home rentals or ridesharing. Finding new ways to make money is something any financially-savvy individual can respect. However, the recent uptick in sharing and delivery trends, including renting homes for getaways, delivering groceries or meals, and chauffeuring strangers in personal autos is risky business for insurance agents. For example, rideshare operators make good money without realizing they have no auto insurance coverage if they get into an accident since personal home and auto insurance policies tend to exclude coverage for business use.

Insurance agents should be asking new and existing clients during their coverage reviews if they’ve taken on any new jobs or responsibilities as a way to uncover the potential coverage gaps. Agents must take the time to educate clients on the financial implications of not having adequate coverage.

Final thoughts

Each agency needs to determine its own set of guiding principles that drive their insurance and risk management solutions. Agencies should consider what types of risks they are willing to take on as an agency and how they can minimize them. Having a conversation with clients every year, paired with a renewal checklist, is one of the best strategies any agency can implement and add to their agency procedures as a recurring task, so no account gets overlooked.

As personal lines insurance agents, it pays to stay committed to educating clients. By improving your clients’ awareness of the potential risks they are exposed to and helping them see the bigger picture, agents can help to minimize loss in the event of a claim.

There will always be clients who are focused on price and fail to see the value of a personalized insurance approach that protects their best interests. It may be less risky from an E&O standpoint to direct that type of client to an alternative solution for their insurance needs.

In any case, an educated client is the best partner for your agency!

The author

Donna Gray is executive director of the American Insurance Marketing and Sales (AIMS) Society, a nonprofit educational organization that provides training, information, and networking services designed to increase sales production in agencies, and administers the Certified Professional Insurance Agent (CPIA) designation For information, visit aimssociety.org.