by Insurance Maze » Tue Jan 15, 2008 04:50 pm
There was a question at some point about "Professional Liability Insurance (E&O) and why an insurance agent needs it.
I hope this will be helpful:
I have a friend who is in the middle of a Department of Insurance investigation about him "not selling enough" life insurance.
It seems that he had a sales interview with a family and spent quite some time in the prospect's home. He did a complete and thorough life insurance needs analysis, with all information being furnished by the man and his wife.
At the end of his analysis, the resulting "Need" was $280,000 in additional life insurance. The agent and the prospects discussed this need and how much insurance premium would be involved to purchase the additional life insurance. The wife wanted her husband to buy the insurance, but the husband made the final decision and he decided that the additional premium was more than he could work into the budget.
The husband finally decided to purchase $100,000 in additional life insurance. The wife didn't like the decision, but what could the insurance agent do? He sold the man what he wanted.
The sale was made and the new life insurance policy was issued.
Four months later, the man who had purchased the insurance, was killed in an auto accident.
The widow filed the insurance claim and received the $100,000 in life insurance proceeds and the agent thought that everything was over - but it wasn't!!
The widow contacted the State Department of Insurance, explained the sales interview where the agent showed a need for $280,000 in life insurance and advised the department that the agent only sold her deceased husband $100,000 in life insurance. She complained that the agent was not professional in his actions and actually cheated her out of $180,000. The department of insurance agreed.
More than likely a claim will be filed in the amount of $180,000 with the agent's E&O carrier, and most likely, it will be paid.
So, this agent, by selling the prospect what he wanted, instead of what he needed, now will be responsible for paying the difference. These are facts that our new agents should keep in mind while they start selling insurance policies.
I hope this will be helpful:
I have a friend who is in the middle of a Department of Insurance investigation about him "not selling enough" life insurance.
It seems that he had a sales interview with a family and spent quite some time in the prospect's home. He did a complete and thorough life insurance needs analysis, with all information being furnished by the man and his wife.
At the end of his analysis, the resulting "Need" was $280,000 in additional life insurance. The agent and the prospects discussed this need and how much insurance premium would be involved to purchase the additional life insurance. The wife wanted her husband to buy the insurance, but the husband made the final decision and he decided that the additional premium was more than he could work into the budget.
The husband finally decided to purchase $100,000 in additional life insurance. The wife didn't like the decision, but what could the insurance agent do? He sold the man what he wanted.
The sale was made and the new life insurance policy was issued.
Four months later, the man who had purchased the insurance, was killed in an auto accident.
The widow filed the insurance claim and received the $100,000 in life insurance proceeds and the agent thought that everything was over - but it wasn't!!
The widow contacted the State Department of Insurance, explained the sales interview where the agent showed a need for $280,000 in life insurance and advised the department that the agent only sold her deceased husband $100,000 in life insurance. She complained that the agent was not professional in his actions and actually cheated her out of $180,000. The department of insurance agreed.
More than likely a claim will be filed in the amount of $180,000 with the agent's E&O carrier, and most likely, it will be paid.
So, this agent, by selling the prospect what he wanted, instead of what he needed, now will be responsible for paying the difference. These are facts that our new agents should keep in mind while they start selling insurance policies.
Posted: Tue Jan 15, 2008 09:58 pm Post Subject:
Insurance Maze said in his OP:
At the end of his analysis, the resulting "Need" was $280,000 in additional life insurance. The agent and the prospects discussed this need and how much insurance premium would be involved to purchase the additional life insurance. The wife wanted her husband to buy the insurance, but the husband made the final decision and he decided that the additional premium was more than he could work into the budget.
Unreal, and altogether too common these days. Fully 70% of all life insurance E&O lawsuits are brought for one reason: the failure of the producer to recommend and place insurance properly. In this instance, it appears that the producer recommended properly, and then placed the insurance according to the wishes of the insured.
Now the widow is trying to see if she can get some free money. Again, not unusual these days.
This is why I tell my staff and crowd to "document, document, document" everything having to do with needs analysis, fact-finding, and the idea that the insured/applicant MUST sign a waiver (drawn up by the carrier's lawyers ONLY) in these type of situations.
In the absence of documentation, I have a feeling that the E&O is going to pay out, and you can bet your a** that the widow will lie about the sales presentation if asked what happened during a pre-trial investigation, any testimony or affadavits she is asked to sign, etc.
I hope this guy has a boatload of that there documentation. Otherwise, he's gonna more than likely lose this one...too bad, too.
InsTeacher 8)
Posted: Wed Jan 16, 2008 08:05 am Post Subject:
More than likely a claim will be filed in the amount of $180,000 with the agent's E&O carrier, and most likely, it will be paid.
hi, I feel thats what the agent's E&O policy is for!
As someone rightly pointed out that this world is too dynamic & now it is all about documenting every moment of your business deals. I'd rather feel sorry for the guy!
MLebanon
Posted: Wed Jan 16, 2008 08:14 am Post Subject: some things that might come in handy!
Yes, it seems slightly tilted towards the lady's end but then again many things are yet to be decided by the DOI. It is not that they don't know how people would move to have their share of "free money"!
But at this juncture, I don't thing the carrier would come pro-actively towards helping the guy, rather the agent has to take his own initiatives (if required consult attorneys) & sort this one out.
He needs to go through all the documents pertaining to that application & see if a place ever existed where he would have mentioned the "need" to have been $2,80,000 & shown the gap. If he finds one such evidence (even a bit in writing which got signed by the applicants), he might as well save his face this time. Otherwise you'd need to take the help of attorneys.
Thanks,
BulkyladyTurk
Posted: Thu Jan 17, 2008 05:57 pm Post Subject:
InsTeacher, Great post!!
I wish that I could speak with someone on the agent's defense team. A quick review of the agent's FNA folder
He did a complete and thorough life insurance needs analysis, with all information being furnished by the man and his wife.
will clearly show what the agent suggested, how he arrived at this determination, and that the clients decided that his recomendation was not budgetable. He undoubtedly had them sign an illustration and this can also be used in his defense.
I fear he's going to get railroaded and that's a shame.
This is why I tell my staff and crowd to "document, document, document" everything having to do with needs analysis, fact-finding, and the idea that the insured/applicant MUST sign a waiver (drawn up by the carrier's lawyers ONLY) in these type of situations.
This statement make me so proud to even have the opportunity to chat with you. Great job!!
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