During the past decade, the partners of Keidel, Weldon & Cunningham, LLP have conducted more than 500 errors and omissions loss control audits for insurance agencies and brokerages with as few as two to several hundred employees. We conducted these audits for not only insurance agencies and brokerages located in New York, but throughout the United States and its territories. Whether an agency or brokerage was required by its E&O insurer to complete an audit as a condition of having its policy renewed (as occasionally happens and for which no agency credit is given) or it simply desires to have an audit to see how it is doing and ways in which it can improve, the feedback we receive from the audit process has been overwhelmingly positive. Most agencies and brokerages tell us they are happy they went through the process because it provides a unique analysis into the inner workings of their employees and their business as a whole. In this edition of The E&O Report, we will review what a loss control audit entails and the various benefits an audit can provide.

During the audit process, we examine in detail the areas in which the agency or brokerage most often experiences E&O claims and lawsuits. The following are just some of the areas that are also typically reviewed during the audit process:

Agency Systems: During this part of the audit, we review the design of both the computer and agency management systems to determine how each is structured, backed up and used by agency or brokerage employees. We also examine how the voice mail and email systems are used by employees and whether certain key procedures are being followed with regard to both.

Producers: When reviewing the practices followed by producers, we look closely at how producers work with potential and existing customers. This review focuses on how information is gathered from customers. We also examine a producer’s continued engagement once an insurance policy is procured.

Customer Service Representatives: During this aspect of the audit, a detailed review is conducted regarding how CSRs perform their jobs on a daily basis. The examination covers such items as procedures followed for policy review and delivery and the steps taken when handling various types of policy changes. During this analysis, a close look is taken at the documentation that exists in both the customer files and agency management system.

Claims Handling: Because many E&O claims and lawsuits arise out of the claims process, a close examination is taken as to how claims and potential claims questions from a customer are handled by the agency. We also examine the procedures followed for claims reporting and any follow-up concerning claims and lawsuits.

E&O Issues: During the course of the audit, we examine any E&O issues and problems an agency or brokerage experienced and the steps taken or should be taken to help prevent similar issues from arising in the future. We also look at the agency or brokerage’s current procedures to identify and deal with potential E&O issues and offer recommendations to improve on these procedures.

An E&O loss control audit provides an agency or brokerage with a number of benefits, including identifying areas where the agency is doing things correctly and those areas where improvements need to be made. This step helps protect against E&O claims and lawsuits. The audit process helps promote consistency in how employees do their jobs, which is turn increases the level of customer service.

In some situations, an E&O audit will result in a discount for the agency or brokerage in the premiums paid for its E&O policy. For example, the Westport E&O policy issued through IIABNY by IAAC (the association’s Membership Services Division) now provides a 10 percent discount for five years if an agency or brokerage elects to have an audit done and implements all its recommendations subject to Westport’s approval. The discount is provided in addition to Westport’s discount for the agency’s attendance at IIABNY’s annual E&O seminars. A final benefit of the implementation (and consistent use) of the audit recommendations offered by Keidel, Weldon & Cunningham, LLP is that many of these procedures can help the agency or brokerage increase the amount of insurance sold.

If you are interested in scheduling an audit for your agency or brokerage, or learning more about the audit process, please feel free to call us at (914) 948-7000.

Submitted by
James C. Keidel, Esq.
Keidel, Weldon & Cunnningham, LLP