Inaccurate Policies Can Harm Your Insureds and Your Reputation
At ReSource Pro, we process thousands of insurance policies every month on behalf of our clients. The data we collect while correcting policies shows an average of nine errors in each policy. In 2018, we logged more than 4.5 million discrepancies. That’s hundreds of thousands of errors per month, an E&O risk insurance that brokers and carriers can’t afford.
Let’s break down the three most common errors we find in insurance policies.
Based on our data, an incorrect location or address is the top error. This is typically caused by a mistyped city or zip code, and while this type of error may not seem difficult to resolve, if overlooked, it could end up creating false coverage for an insured.
In other cases, a location error is not a typo, but the coverage itself. For instance, an insurance buyer living in Florida could easily end up paying high premiums for flood insurance if they have a zip code on the coast despite living further inland, away from high-risk flood areas. This kind of misquoting can lead to inaccurate coverage.
Adequate protection against loss is the primary reason people purchase insurance, yet according to our findings, incorrect aggregate and per occurrence limits are the second most common policy error. In this case, the error is not caused by a mistype, but rather by poor risk assessment. For example, let’s say that a company receives a policy with a per occurrence limit of $1 million and aggregate limit of $2 million. The company is later sued on two separate occasions in the same year, each time for $1 million. Because its per occurrence limit is $1 million, both lawsuits are covered. However, because the company has reached its $2 million aggregate limit, their insurance is not required to reimburse them for any additional claims that year, even minor ones.
A policy without proper coverage isn’t worth much to a policyholder, yet our data indicates that exposure is the third most common policy error. This usually stems from a discrepancy between the information on the ACORD form and the policy itself. For example, an insured may ask for a policy covering 10 vehicles, but then the issued policy erroneously states 7 vehicles, leaving 3 uncovered and open to risk. A simple check between the binding order and the policy can reveal many exposures that could adversely affect the insured.
Consider the below measures to ensure your people understand risks:
- Determine a system to evaluate new hires (producer/agent) level of risk analysis
- Require employees to take risk analysis courses
- Provide employees with resources such as seminars or articles that focus on risk evaluation
Learn how to avoid these errors in our next post. Want to find out what else you can discover with your policy data? Check out ReSource Pro’s Policy Insights.