PF&M at a Glance

Risk surveys and exposure analysis checklists

Let’s face it—preparing and completing applications, questionnaires, risk surveys and coverage and exposure analysis checklists are not tasks that anyone looks forward to. These documents serve many useful purposes and benefit both you and your customer, but they are time-consuming. In fact, sometimes these surveys and checklists create much frustration for clients, who tire of the seemingly endless questions, need for information and requirements to provide suitable supporting documentation. At times, the temptation to just give them up completely can be overwhelming.

Don’t do it! As a producer or agency owner, you have a lot at stake. Take the following brief survey. If you can give an unqualified “Yes” to every issue presented, you are in pretty good shape. On the other hand, if an answer is “No,” “I’m not sure” or “Maybe there’s room for improvement,” perhaps more attention is needed.

Issues

• Training: My staff and I are properly trained and knowledgeable about all the insurance products available and can properly and effectively communicate them to our clients.

• Client education: My staff and I always take the time to make certain that our clients understand what we are saying each time we discuss coverage with them.

• Exposure analysis checklist: Our standard procedure is to complete a risk survey on every client at least annually or when substantial changes occur.

• Documentation: My staff and I document in writing every conversation that relates to any past, present or prospective client.

Facts

• Training: Insurance is an ever-changing business, necessitating ongoing training in many areas, such as technology, technical issues, operations and sales. Poll your staff, find out where they sense they might be deficient and provide training to turn that area into a strength.

• Client education: This area can take in many different approaches. Periodic newsletters, postings on a Web site and specific mailings can educate your customers concerning certain insurance terms or exclusions. The result may be an increase in sales as clients request coverage on excluded exposures. The danger is that a client discovers that coverage does not apply only after a loss occurs. Isn’t it better to know that beforehand?

• Exposure analysis checklist: Regardless of whether your clients are commercial or personal, you should periodically review their exposures to ensure that they are properly covered. In this way, if a client does not want a particular coverage, having them acknowledge that in writing provides you with a good defense if it is later alleged that the coverage was never discussed or offered.

On the other hand, there’s a good chance that the client will purchase the coverage needed to cover an uninsured or excluded exposure, increasing both your sales and profits, in addition to enhancing your professional image and improving your relationship with the client. Doing so annually is recommended for both commercial and personal clients.

• Documentation: This provides numerous benefits to all parties but can probably benefit you more because most errors and omissions claims have their basis in inadequate or nonexistent documentation. Most lawyers involved with these claims state that a properly documented conversation would have either eliminated the claim completely or it would have ended with a much different result. Cases that go to trial with inadequate, incomplete or nonexistent documentation are decided based largely on the statements of the parties.

In addition to accomplishing their stated purposes, good risk surveys and exposure analysis checklists also go a long way in assisting in training, client education and documentation. Preparing checklists to identify client needs also serves to identify staff training issues that need attention. Clients discover unexpected exposures and coverage needs through them and documentation issues are more readily identified and addressed by using them.

Keep in mind that exposure analysis checklists are designed to assist you in beginning the analysis for any given coverage. They should be combined with similar exposure analysis checklists for other coverages to develop a complete picture of the insured’s operations. While generally comprehensive in nature, these checklists are only starting points and additional risk-specific questions may arise as the exposures are developed.

They are intended to supplement ACORD or company-specific applications. While these applications are also very comprehensive and detailed with respect to the type and amount of information requested, don’t forget that no single application necessarily adequately responds to every question that may arise for every risk, especially the larger or more complex ones. In these cases, it is always in the best interests of both you and the insured to provide a cover letter that includes complete details of the operations and exposures involved. This is particularly important if the risk has characteristics and features that cannot be brought to the attention of the insurance company in any other way.

Please note that this is only a brief overview of exposure analysis checklists. The PF&M Analysis from The Rough Notes Company, Inc., contains broad and detailed checklists for most lines of coverage analyzed. Producer OnLine sub-scribers can refer to the 7.2 Section of most coverage analyses for samples of these detailed checklists for their use. *