Most insurance agents want to write every kind of insurance. In the insurance industry we call this a generalist. Many times this develops either from wanting to help your customers in any way possible or trying to survive as a new business owner. However if you aren't careful this could bite you big time.
One of the insurance products that results in the most errors and omissions claims is flood insurance. As many agents will tell you this can be a very complicated and confusing product especially if you aren't familiar with all the National Flood Insurance Program and private flood insurance guidelines.
In this episode of the podcast we are going to discuss some things to help protect yourself when doing an agent of record change on a flood insurance policy. In case you aren't an insurance agent and you are reading this particular blog lets talk about what an agent of record change is?
An agent of record change is when you want to change agents on your insurance policy. Maybe you have moved to a different town, your current agent is changing industries, or you are just wanting better services these are all reasons why an agent of record change might be requested.
As an insurance agent you are happy when your client has decided to move that missing piece of their insurance to your agency. Most agencies want as many lines as they can get. Here at the Flood Insurance Guru we strictly want flood insurance customers and flood mitigation customers so every agency is different.
So you are getting ready to send the client that agent of record request to sign, STOP!!!!
You could be exposing yourself without even realizing it. As we mentioned before flood insurance can be complicated and this is probably why more than half of flood insurance policies have some kind of mistake on them. Once you have the client sign this request and you submit then you are responsible for everything on that policy and everything that might not be on that policy.
So let's look at a few things to review for completing this process
- Flood zone verification
- Foundation type
- Contents coverage
Flood zones are always changing for the good and the bad. Let's say that the policy you are looking at was setup many years ago when the property was in a special flood hazard area. However now it is in a low risk area but you don't pay attention to it. You could be held responsible for the customer being overcharged in the future.
What about foundation type? This is where alot of insurance agents get confused. What is the difference between a crawlspace and an elevated building? What exactly is a basement?
So many times a flood policy is set up with the wrong foundation type and it goes unnoticed for years. We recently had this happen with a customer coming to us from another insurance agency. The property had been classified as a basement while it was actually a crawlspace. The customer had been overcharged $2500 a year for 5 years. Thankfully we were able to help this customer get some of those premiums back but that does not always happen. As you can see this can create a major exposure for an agency.
Contents coverage is something else that really is taken for granted by everybody. Many agents assume the client only wants enough coverage to cover the loan and many property owners assume contents are covered. This is one of the major areas that saw E & O claim increases after flooding in Baton Rogue in 2016 and Hurricane Harvey in Houston in 2017.
These are only a few things that stick out when doing an agent of record change you should do a full flood insurance review including exploring private flood insurance options for your clients.
If you are an insurance agent and want to make sure you are doing this flood policy review properly then make sure to visit our website for free resources. If you are a property owner and want to have this flood policy review done you can click here.
Remember we have an educational background in flood mitigation which means we can help you understand your flood risks, flood insurance, and mitigate your property against flooding.