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E&O Loss Control

Agency Automation: Friend or Foe?


By Curtis M. Pearsall, CPIA, CPCU, AIAF

Most agency owners and staff would agree that advances in automation have greatly increased our dependence on technology. The benefits of automation are easily identified, however, with increased efficiency at the top of the list.

But has automation increased or decreased E&O exposures in your office? This is definitely a hot topic among our 11,000-plus agent- customers and the answer is not a simple one. In order to help you gauge the impact of automation on your agency, I will devote the next six or so installments to this issue and how it impacts your risk exposure.

Overall, most carriers that interface with their agent-customers require you to sign an online Terms of Use agreement, which is similar in nature to paper contracts. As with any contract, whether electronic or paper, the Terms of Use agreement should be carefully reviewed by agency management and, if need be, by legal counsel before signing. A few items contained in most agreements that you must comply with are:


  • hold harmless provisions

  • use of information from the carrier's website may not be copied, reproduced, etc., without the permission of the carrier 

  • retention of records in the event of termination of the agreement

  • retention of signed documents and by whom

One of the more common types of agency automation is a process known as download, which takes place when a company sends data to you electronically. In many respects, download replaces what is fast becoming the antiquated system of mailing hard-copy documents. Download is used more predominately in personal lines, but there is no doubt that its use with commercial files, as well as billing and loss information, is rapidly increasing.

A download file is typically sent each night to the agent's mailbox. In order to ensure that you are dealing with accurate data when communicating with your customers, be sure to accept downloads on a daily basis, preferably first thing in the morning. Doing so will minimize, if not eliminate, any E&O claims resulting from inaccurate data.

Typically, the carrier will provide a transaction listing of those items that have been modified, or you can review the download listing in your system. This will make it easier to know which endorsement requests have been handled and which ones you should retain on diary.

With this new technology, it is recommended that one member of your staff assume responsibility for managing the nightly data downloads from carriers. Don't forget to designate a backup person, however, who can take over this responsibility when necessary.

Based on the agency input I receive, accuracy is the biggest concern associated with downloading data. Think for a minute about the accuracy of the paper documents you receive from carriers. Is it 100 percent? I doubt it. So, it certainly stands to reason that electronic transmission of data is not going to be any more accurate. Therefore, don't assume downloaded information is error-free. Proofread and review it as carefully as you would a paper copy.

Most companies you interact with will assign passwords that enable agents to access, review, and retrieve data. Make sure you consider the likelihood of security breaches should an employee leave your agency. Could he or she retain access to significant data regarding your clients? If this possibility exists, make sure you either change your agency password or notify the carrier that this person is no longer employed by you and should be removed from the access list. Designating one employee to handle agency/company interface is helpful in this case, as well, since he or she can assume responsibility for notifying carriers of such situations.

Lastly, most carriers will perform a "test" prior to implementing your download process. This is intended to help you become accustomed to using the system, and taking part in the test process will ensure everything is functioning properly before you begin using downloaded information. Don't wait until you encounter a problem to acquaint yourself with this increasingly popular method of accessing data.

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