Q: Following up with late-paying clients wastes large amounts of time at our agency. Is there a recommended follow-up policy that preserves workflow? If we have been following up with clients for late payments, are we stuck in that precedent forever?
Response 1: If a client causes a wreck with lapsed coverage and you didn’t remind them to pay their premium like you always do, you will get sued. Start a new policy, inform clients of the new policy and stop following up on late pays.
Response 2: Your first call should be to your errors & omissions insurer. They'll tell you not to follow up because it creates an expectation that you can't and shouldn't live up to. That's been the advice from E&O and agency management experts for years.
However, it’s easier said than done. Very few agents follow this best practice 100%. If you get a late notice on your biggest commercial client's homeowners policy, you're a rare breed of agent if you don't give them a call. Worse yet, once you've done this deed, you're probably stuck with it as a precedent forever.
Follow the advice of your E&O insurer, who will probably tell you to stop sending reminders and never do it again. If you're not prepared to do that, set up a workflow you can live with and follow it consistently. Also, make sure you have adequate limits on your agency’s E&O policy.
Response 3: The agency should never follow up on late-paying clients or cancellations. The insurance companies send out cancellation notices, which will legally suffice.
Since you’ve been reminding clients, you should notify all direct billed clients that you will no longer be sending reminders. The tone of that letter should be positive, courteous and explanatory. Next, you should contact your E&O carrier to request a full E&O audit.
Response 4: If you’re going to continue following up, you must do so for all customers. In this instance, invariable practice—doing the same thing for every client all the time—is the key defense. Most states have evidentiary statutes that force the plaintiff to prove you didn’t follow your practice if you have one.
Response 5: I call my clients. I only have about five habitual abusers of the cancellation follow-up. They are the same clients each month, so I may have created a monster. It’s much easier to send a simple email reminder and they usually remit that day. These clients are contractors who are just very busy during the construction season.
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