There's a famous line in the movie A Few Good Men that was delivered by Jack Nicholson where he exclaims to the prosecutor, "You can't handle the truth!"
When I teach coverage classes, my students tend to raise six objections regarding the need to deeply know the coverages they sell:
Objection #1 – In one class a student exclaimed their frustration with me because I would not give them the answer to a coverage question. They vented that other instructors always gave them the answer.
Instructors who give answers to coverage questions without extreme specificity relative to the form to which they are referring, are giving you the wrong answer 100% of the time. Do you want another wrong answer?
Coverage questions can be generic. However, correct answers to coverage questions are, 100% of the time, specific to the form being sold or that was sold. Furthermore, the correct answer is dependent, 100% of the time, on the exact client and their exact situation. Generic answers are useless.
Objection #2 – The second objection is usually: "Why can't all policies be the same?" Because not all people have the same needs nor do all carriers have the same desire to provide the same coverages. Additionally, if all coverages were the same, the absolute last thing anyone in the industry would need is an insurance agent.
Objection #3 – The third objection is: "That means I have to read the policy, and that is a lot of work. Who is going to pay me?" You lazy person, that is how you earn your commission.
A whole lot of E&O claims arise from the following scenario:
"I went to a class and the instructor said that coverage existed under this form, but now the adjuster is denying the claim. The adjuster is wrong, right?"
"Did the instructor say the coverage was included in some industry standard form, form number WXY 123 2010?"
"Yes"
"Is this the same form you sold your client?"
"No"
"Then why in the world would you think coverage from a form you did not sell, should apply?"
Objection #4 – The fourth objection that then arises is: "This means I have to read the policies I am selling?" No, you do not have to read the policies you are selling. Lots and lots of agents do not even know how to read a policy much less take the time to read the policies they are selling.
However, if you want to be a good person and verify the form you are selling actually provides the coverages your clients need, or even if you are not a good person and simply want to avoid E&O claims, you probably should read the forms you are selling.
Objection #5 – Then comes the fifth objection: "But what if I don't understand the forms and/or if the answer is not obvious?" In theory at least, you are being paid to think. If you do not understand the form or the answer is not obvious, try thinking it through. If that does not work, then research the situation. There are a considerable number of high quality online resources that exist including many online classes. I do suggest avoiding online forums with other agents, however, the "Ask the Expert" service provided by the IIABA's Virtual University is excellent.
Objection #6 – The sixth objection follows with: "But this means I must talk to the client and learn what coverages they really need. They won't really understand all this so that means I'll have to talk to them for a long time about insurance and they don't really like insurance, so I'll frustrate them and maybe lose a client. Isn't it better to just sell them a policy and get out of their way?"
Absolutely. This is what the agent did who sold a policy that excluded coverage for all residential construction to a builder who only did residential construction. Let's see how that worked out: The builder had a large claim. The carrier denied the claim. The insured sued and the court found for the carrier. The insured sued the agent. The agent said, "Well, I don't read policies, but I put a disclaimer on your proposal saying you had a duty to read your policy, so why did you not read your policy?" The agent lost.
The agent lost the E&O claim, rightfully so. The agent's reputation was ruined. The agent lost revenue, profit, and value. Unlike in Nathaniel Hawthorne's book, The Scarlet Letter, the agent was not forced to wear a big I or a big L, but that might be applicable so that other insureds know how ignorant and lazy they are.
Think about this just a little: Absolutely no one needs an agent who is selling them the wrong coverage. The coverage the agent sold could have been correct if the agent had just thought through one simple point! I wish this was an isolated incident, but this exact mismatch of client and coverage is fairly common because the agent can only sell price. Anyone can sell a low price policy with the wrong coverage. The value is $0, if not negative. Maybe the solution is to charge inept agents a commission rather than paying them or have them give half of their commission to an account executive who does know what he or she is doing.
A better solution is for the agent to learn coverages deeply. To do that, the agent must learn to read and understand forms. As adults, the absolute only way to achieve this goal is to learn the forms you are selling -- not only the industry standard forms. Learning forms you do not sell has minimal value. My clients who learn their coverages in this manner create constructive and positive relationships with their clients and the extra work involved decreases significantly -- because they actually know what they are doing.
To learn forms this deeply you need instructors who give you the honest answer, which is, "It depends on the form. Why don't you research the form as it applies, and tell me the answer? I'll review your answer and we can collaboratively discuss the best solution for the client."
NOTE: The information provided herein is intended for educational and informational purposes only and it represents only the views of the authors. It is not a recommendation that a particular course of action be followed. Burand Insurance Education, Burand & Associates, LLC and Chris Burand assume, and will have, no responsibility for liability or damage which may result from the use of any of this information.
None of the materials in this article should be construed as offering legal advice, and the specific advice of legal counsel is recommended before acting on any matter discussed in this article. Regulated individuals/entities should also ensure that they comply with all applicable laws, rules, and regulations.
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