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High frequency, less severity, deserving of E&O risk management procedures
In reviewing E&O claims frequency, it is probably no real surprise to see claims arising out of the writing of personal lines. This segment generates a fair amount of transaction activity and the sophistication level of customers can vary greatly. In fact, just over one-third of E&O claims received by Utica National in 2009 were generated from providing (or failing to provide) a personal lines product.
While the frequency of E&O claims among heavy personal lines agencies is somewhat high, the severity (average settlement dollars) is typically less in personal lines compared to their commercial lines counterpart. Of the two major products-personal auto and homeowners-homeowners actually generates more E&O claims than personal auto. Plus, the average personal auto claim is in the $25,000 arena, while homeowners is slightly higher, averaging around $30,000.
Homeowners
Starting with homeowners, let's examine some of the more common mistakes that agents are alleged to have made involving personal lines:
* Agent doesn't have the customer sign the application. Always have your customer review the application before signing it. This will be a solid defense should any of the information later be determined not to be accurate. With more applications now being uploaded to the carrier, it is highly suggested that after uploading the application, you print a copy from your system and have the insured sign it.
* Valuation issues. How are you determining the proper property limit? Using company estimators is certainly common, but you need to be very careful on those...