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Avoid Simple Mistakes That Can Lead to Liability
Avoid Simple Mistakes That Can Lead to Liability
12.01.2016
Insurance industry studies indicate that
approximately 5% of E&O claims involve the sales or administration of life
insurance. While they are relatively rare, when those claims occur they can be
significant. The majority of claims filed involve common errors that are easy
to avoid with proper attention to detail and documentation.
The most common mistake made by financial
representatives is the failure to administer the application process
diligently. They often fail to exercise due care in assisting their clients to
answer the questions on the application - i.e. they fail to make sure that each
question is answered correctly and accurately. Failure to do so may result in
an E&O claim by the intended beneficiary if payment is denied by the
carrier.
Financial representatives also often fail to
recognize answers that do not correctly represent a client's health status. Questions
such as "Have you ever been diagnosed with an eye, ear, nose or throat
disorder?" are often answered in the negative by "ordinarily
healthy" applicants. A long list of "no" answers should raise an
alarm if the financial representative is paying attention. Often both the
representative and the client fail to consider that simple issues such as a
prescription for glasses or allergy treatment are relevant from the carrier’s
perspective.
Another common mistake is the failure to maintain
documentation of all communication with the client. For every meeting with a
client a record should be made of who said what and what they the parties
agreed to do. Financial representatives are often targeted for lawsuits by
beneficiaries whose claims are denied, and must be prepared to defend
themselves with proper documentation.
While you can be sued by anyone, you can make it
harder for them to make a case against you by attention to detail and proper
documentation.
Written by
CalSurance Team
Published December 2016
