New Products Lead to New Exposures

By: williamjones
May 1, 2015

By: Caryn Mahone

An agent needs two sharp eyes at all times to stay on top of the market. Keeping abreast of new product offerings and offering coverage to customers may well prevent a future E&O claim.

When a carrier distributes marketing brochures about new products or coverage extensions, the best practice is to read them and provide notice to your customers if appropriate. Otherwise, when your customer has a claim, they could argue that had they known about this new product, that higher limits were obtainable or that the coverage was available without the exclusion, they would have pursued another option.

A constant flow of new insurance products includes first-party breach of data coverage, third-party cyber liability coverage and insurance coverage for the use of commercial drones, such as in farming operations.

For example, if a carrier providing liability coverage to farmers includes coverage for commercial drones used to survey crops, what qualifies as a covered invasion of privacy? When an incident occurs during drone use, will the policy exclude it as an intentional act? Or because it qualifies as an aircraft?

In some instances, you face not a new product on the market, but rather a product that is new to your customer. Even though you’re working with an existing customer, take extra care—E&O claims relating to new business drive frequency. Use proper risk exposure assessment and update the application with a customer signature.

And whether or not the agency has a legal duty to do so, review prior policies with new customers for any coverage differences—documenting differences with the customer can prevent future E&O claims. Regardless of a new product or a new customer, agents need to ask themselves a few questions:

Do my customers have these types of exposures?
Should I be offering these products to my customer?
Do I understand what they cover and do not cover?

Hindsight after an uncovered claim is a great coverage salesman—after the fact, even your thriftiest customer will say they’d buy any coverage presented to them. Protect yourself and your agency by keeping abreast of new products and new coverages—and sharing them with your customers in writing.

Caryn Mahoney is an assistant vice president, claims specialist with Swiss Re Corporation Solutions and works out of the Chicago office.

Write to Win

Here are some additional considerations to keep in mind when writing new coverage for a customer:

Request an updated schedule of vehicles and have your customer sign off on it for new commercial auto policies.
Ask if your client needs “drive other car” coverage for a commercial auto policy. If so, recommend purchase. If your customer is leasing a vehicle, does the lessor provide the coverage?
Review both new and old policies and point out any differences to your customer in writing when replacing prior coverage. Review the limits, sub-limits and underlying coverages. Is there an exclusion on one policy or the other?
Advise your customers in writing of underlying policy limit requirements, even if you did not place the underlying policies themselves. Confirm there is no exclusion in the umbrella policy that is not in the underlying policy. Explain any differences to your customer in writing and have him sign off on it. Alternatively, work to delete the exclusion.
Recommend coverage for non-owned auto exposure when placing a commercial auto policy. Confirm whether the operators of the business auto have personal auto policies in place, and if that coverage is adequate. If the vehicle is leased, determine whether the lessor is providing the primary coverage and confirm that those limits and coverages are adequate. Confirm that the umbrella applies to the leased vehicle. –C.M.