The Unexpected
If you’ve been in the business for a while, what you do comes naturally, right? So you probably don’t dwell on the complexities of your job and the countless opportunities you have to make a mistake. But bear with us for a minute while we remind you.
Think about the range of tasks you do in an average day. You meet with prospects for the first time to assess their needs. You put together illustrations to show prospects how their products work. You present recommended solutions and answer client questions about it. You deliver policies and review key provisions for clients. You handle service requests from insureds and their families. You meet with clients periodically to review needs and discuss new opportunities. And when investment markets are volatile, you speak with clients on the phone to allay their fears and concerns.
Now, consider for a moment how complex all those tasks are. They involve product design issues, regulatory concerns, tax questions, and of course, the mysteries of human nature, which are different for every person you deal with.
To make things even more complicated, think about how hard it is to communicate with another human being, even when the subject matter is relatively simple. When the subject matter is difficult, the ability of two human beings to effectively share ideas without garbling their messages is limited, at best.
Takeaway? That it’s a miracle insurance agents and advisors communicate as well as they do and that more financial advisors aren’t sued for mistakes arising out of the complexities and disconnects that occur when people talk about financial matters.
Supporting this notion is the breathtaking range of errors that often lead to E&O insurance claims. According to one major E&O insurer, the most common reasons for E&O life/health insurance claims, in order of frequency, are:
- Misrepresentation (25 percent)
- Failure to provide (11 percent)
- Failure to explain (11 percent)
- Office error (11 percent)
- Policy change (9 percent)
- Business management (9 percent)
- Suitability (6 percent)
- Premium error (6 percent)
- Tax loss (4 percent)
- Due diligence (2 percent)
- Beneficiary (2 percent)
- Other (2 percent)
These and other mistakes produce serious financial consequences, according to the same insurer, with the average cost for a disability-insurance claim being roughly $149,000; for a pension product, $71,068; and for an individual life product, $40,000.
Bottom line? That given the complexity of your job, it’s incredibly easy to make a mistake, which can lead to highly damaging legal settlements. All it takes is one mistake to turn a client against you and ensnare you in a nasty legal proceeding. And if the case doesn’t go your way, it’s all too easy to have everything you’ve worked so hard to achieve go up in smoke.
Don’t let this happen to you. Do business defensively and take steps to protect yourself against nasty client lawsuits by purchasing comprehensive, affordable E&O insurance from EOforLess.com. And if you’re already insured, keep your policy in force to avoid coverage gaps that can have equally damaging consequences.
Never miss a due date with our FREE renewal reminder. We’ll send you a renewal reminder when it’s time to renew your policy. Sign up now!