E&O Best Practices

At IIAW, we know that you are busy managing the risks of your clients and you don't always have adequate time to devote to your own agency's risks. That's why we have created this list of key E&O risks and best practices for management to focus on to mitigate those risks. If you have any questions or need help implementing or tailoring the recommendations, feel free to reach out to our Director of Risk Management, Mallory Cornell.

To learn more best practices and find additional risk management resources, don't forget to check out the E&O Happens website!

Increased E&O Risk due to: Organizational Structure

The more people who touch a transaction to complete it, the more likely something would not get done as it should.

It’s time to review your agency transaction policies – how many times does each transaction change hands? Are there different procedures based on the size of the transaction?

What Management Can Do:

    • Have an updated organizational chart
    • Make sure every employee has a current position description and list of position qualifications that details the expectations of each individual
    • Determine if the organization is structured horizontally (lots of peers) or vertically (lots of layers) and consider which structure would be the most effective
    • Organize the agency’s workflow based on the tasks that must be completed and determine who is best qualified to complete each task

Increased E&O Risk due to: Lack of Uniform Practices and Procedures

Without written guidelines, agency personnel are forced to rely on their own best judgment in a variety of circumstances.

What Management Can Do:

      • Train all employees on policies and procedures
      • Form a committee or team to update old office policies and procedures
      • Determine how adherence to policies and procedures will be reviewed or audited
      • Include adherence as a consideration in each person’s compensation plan and performance review


Increased E&O Risk due to: Lack of Compliance with Office Practices and Procedures

If there are policies and procedures already in place, you’re your agency has mitigated one risk. However, you must take that one step further and ensure employees are adhering to these guidelines. Employees must be held accountable for following agency policies and consistent discipline should be applied to reduce the chance for error

What Management Can Do:

    • Determine how practices and procedures will be reviewed or audited, by whom and when
    • Consider conducting periodic audits to ensure adherence to agency practices and procedures
    • Make sure every employee has a current position description and list of position qualifications
    • Have an automated service schedule for each of your customers and be sure services are provided when appropriate
    • Include adherence with practices and procedures as consideration in each person’s performance review and compensation plan
    • Create an agency management activities report to monitor adherence to agency practices and procedures on a periodic basis

Increased E&O Risk due to: Inadequate Training

The truth is, most employees are trying to do the right thing. The problem arises when we have not adequately trained employees and they need to make their own conclusion about whether they are acting appropriately. There are a number of excuses about why training has not been done, but at the end of the day the time and resources that are put into training can pay off in a big way.

What Management Can Do:

    • Improve employee IQ by providing all employees with access to the Big “I” Virtual University
    • Prepare a career education path for each employee. Reward employees for reaching milestones and implement consequences for failure to achieve goals
    • Provide training beyond typical continuing education needed for licensing. Consider training around organizational effectiveness, leadership and time management
    • Consider appointing mentors for new hires
    • Develop and formalize an orientation program. Make sure new employees understand where to go for guidance and understand the impact of errors & omissions in their servicing of the business
    • Hire the right person for the job
    • Lead by example – maintain a culture that promotes professional development

Increased E&O Risk due to: Time Constraints

Agency members often state that E&O claims arose due to employees simply didn’t have enough time to do the task correctly or to do something about it at all. Most people feel that risks could be mitigated if they just had more people, but insufficient staff is not the problem. Rather, it may be the ability of the staff to manage the tasks that must be completed and use the tools available to free up time to complete all tasks required.

What Management Can Do:

    • If employees feel overworked, but it seems like productivity or growth is lacking, there is a good chance you are not utilizing automation properly and may need to re-evaluate and redistribute the workloads in the agency
    • If productivity seems to be high, you can still be understaffed and people are just processing items without thoroughly reviewing them. In this case, you may need to look beyond productivity to understand what is really happening and respond accordingly
    • If appropriate, use industry best practices to calculate Revenue per Employee

Increased E&O Risk due to: Chronic Backlog

The insurance industry is reliant on the importance of specific dates. Therefore, the ability to manage and prioritize work is of utmost importance. Agencies should operate with reasonable turnaround for every transaction. When items are not processed in a timely manner, it leads to inefficiency and, potentially, E&O claims.

What Management Can Do:

    • Determine the extent of backlog in the agency by auditing each person’s work including suspense items that have been moved forward but not completed
    • Consider developing service targets, such as number of days for processing items received, return of phone calls, claims reporting, etc
    • Develop a system of work flow management that will permanently eliminate backlog and a reporting system to determine when deadlines are not being met
    • Monitor each person’s work to ensure targets are being met

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