By Curtis M. Pearsall, CPCU, AIAF, CPIA, President – Pearsall Associates Inc. and Consultant to the Utica National E&O Programs
Most agencies would acknowledge that a quality agency proposal is key to attracting and retaining business. A great proposal should increase the potential for a successful outcome. But what’s necessary for a proposal to be considered “great?”
An important issue that agents may overlook is how well customers understand the insurance program you are proposing. Although your customer understands the business they are in, their level of insurance knowledge is most likely less than yours. When you build your proposal template, are you looking for your proposal to provide your customer with a better understanding of the coverage they have and, quite possibly, the coverage they don’t have? A good test is to take your proposal home and ask a family member if they understand it. Unless they are also in the insurance business, chances are they don’t.
Agencies tend to develop their proposals at a level that they understand, but they would be remiss in believing that their customers understand it as well as they do. Customers want and need to understand their insurance program – and that’s in the agent’s best interest. Therefore, when the customer understands their insurance program, there should be fewer surprises to the customer if there’s a claim. The customer should better understand when an exposure is not covered, because you helped them to better understand their coverage. Helping customers in this manner can also give you a greater chance to secure and retain the business.
If an E&O claim develops, the agency documentation will play a key role – with the agency proposal being one of the documents introduced. The goal is to ensure that the proposal helps your case, not hurts it.
The following are important Items to consider when preparing your proposal:
- Detailed explanations and definitions of key terms. Agents tend to use terminology they understand. Help your customers understand terms like “replacement cost,” “Business Interruption,” Agreed Amount,” “retro date,” “claims-made,” etc., by providing definitions that more clearly explain each term.
- Abbreviations. Avoid abbreviations if there is any chance the customer will not understand what they mean, or without providing an example of the abbreviation before it is used in the remainder of the proposal, i.e., Commercial General Liability (“CGL”).
- Easy-to-understand language. The language should not be above the ability of the prospect to understand it.
- Additional parties. Reference any known mortgagee or loss payees.
- Details. For example, when dealing with a “claims-made and reported” form, include language that details what the customer’s obligation is when a claim occurs. Providing an explanation for the term “retro date” is suggested, as well as how defense costs are handled – are they “within the limit of liability” or “in additional to?” Specifically note any policies that are subject to audit.
- Reference limits. There are two ways to handle this. One is to provide the customer with a variety of limits to choose from. The other approach is to include a notation that higher limits may be available upon request.
- Carrier rating information. Include financial rating information (AM Best, Demotech, etc.) for each of the carriers with an explanation of what the rating means. It is recommended to use the exact definition as provided by the rating service. If any of the carriers are non-admitted, provide an explanation of what this means, including language referencing the lack of a guaranty fund.
- Other coverages. When listing other coverages for the customer to consider (Eployment Practices, Cyber, Pollution, etc.), it is not possible to list them all, so the best approach is to list some of the more noteworthy coverages under a header “Other coverages to consider include, but are not limited to, the following.”
While providing the customer with a greater degree of education is the goal, it is not possible to provide in-depth information on every element of the proposal. For this reason, include language such as the following:
Information contained in this proposal is intended to provide you with a brief overview of the coverages provided for reference purposes only. It is not intended to provide you with all policy exclusions, limitations and conditions. The precise coverage afforded is subject to the terms, conditions, and exclusions of the policies issued.
While many agencies are sensitive to the length of their proposals, enhancing your proposal to provide more education will provide greater benefits and success.
This information is provided solely as an insurance risk management tool. Utica Mutual Insurance Company and the other member insurance companies of the Utica National Insurance Group (“Utica National”) are not providing legal advice, or any other professional services. Utica National shall have no liability to any person or entity with respect to any loss or damages alleged to have been caused, directly or indirectly by the use of the information provided. You are encouraged to consult an attorney or other professional for advice on these issues.
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