Insurance Agents Necessary Reality

Agents have fiduciary duties to their clients requiring the agent to collect all relevant details of the risk to be insured. That involves asking several questions as to the characteristics of the risk which the insured wants to place insurance against. All the collected information needs to be translated to the underwriter of the carrier which the agent wishes to quote/place the policy so the underwriter can appropriately approve and bind coverage. click for more info

If an insured withholds material information, asked of him from the agent and the underwriter, who then proceeds to place the policy enforce, the burden falls on the insured in the event of any uncovered claims arising from the omitted information. If it is the agent that withholds material information or does not ask appropriate questions, the burden falls squarely on the agent’s shoulders. The agent should have asked the right questions, collected the insured’s response and submitted those answers, via the application, to the underwriter and/or carrier. This is where all agents are not created equally.

Insureds seek out an agent that they feel comfortable in handling their insurance needs, whether it be personal insurance or business insurance. Insureds that receive a warm fuzzy feeling from an agent the first year are less likely to change from year-to-year unless the agent makes an egregious error in his fiduciary duties, such as placing a policy that does not match the needed coverage (usually not discovered until a claim is filed and not paid). That is Marketing 101: spend 90% of marketing money attracting a client and 10% keeping the client. Unfortunately, some agents use all means necessary to attract and retain their clients even if that means acting in the agents best interest instead of the insureds interest.

I encounter this problem more often than I like to recall. I am no different than any other agent when it comes to soliciting new business from my community. I shake hands, kiss babies, attend social functions, and join networking clubs for the sole purpose of obtaining new clients. That means I have to impress someone greater than their current agent is doing. The difficulty is when the current relationship has been well established over a several year period and the incumbent agent has been doing business as usual. Business as usual means the agent has established a rapport with his client well enough where the agent completes the application for the client assuming he knows exactly what the client needs and the specific characteristics of the risk. “Oh sure, Mr. Client, this new property purchase is just like the other 3 we insured for you last month. I’ll get that taken care of for you.” No other questions. No other information requested or supplied. The client is thinking how great it is that all he has to do is call his “great” agent, tell the agent he just purchased something similar to past purchases, and BAM, all done. Covered. No more time wasted on silly details.