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E&O Loss Control

Agency Automation: Friend or Foe? (Part 2)


By Curtis M. Pearsall, CPIA, CPCU, AIAF

In this issue of looking at the various types of agency automation and their potential impact on error and omission (E&O) claims, transactional filing will be the topic. It is my perception that this area is largely misunderstood by many agencies. Yet, this is a type of automation has the potential to decrease your E&O exposure if handled properly. If not handled properly, it has the potential to increase your E&O exposure.
Going back to the late '70s and early '80s, I can remember a slogan "Paper free in 83." Well, many would argue that we are worse off now than before. Yet for agencies that have made the move to transactional filing, this is a step in the right direction. Essentially this involves no paper files. Paper that would normally be included in an insured's file is now filed in a folder (in the back room) marked with the date of the transaction. To review an insured's file, you go into your computer system and review the various transactions that have taken place. Each of the transactions will indicate the date it was requested, handled, etc. To review the particular correspondence, you would need to go to that date file in the back room. This file would contain all correspondence for transactions handled that date.

Some of the benefits of this type of system are:

  • With the proper training to ensure the staff understands the system and concept, morale is almost always enhanced. Think about it: would your attitude be different if you came into work and there were no files, no paper on your desk? Sounds pretty good to me!

  • Since you don't need to see the file to determine what has been transacted, you can improve your customer service because you can simply go into the system and get the history of the transactions you are looking for. This applies to claims as well. Thus to a large extent, anyone can view anyone else's work.

  • Virtually all of the agencies that I spoke with reported an increase in efficiency.

  • Many of the new transactional filing systems have been enhanced containing built-in suspense features. Remember that there is no file to put suspense items in.

  • The system has the capability to store various checklists that have been used to evaluate the exposure, any correspondence from insurance companies and insureds, as well as letters from the agency. There will be more credibility to these records as the requests to the insurance company and to the insured are date-generated. You cannot go in and change the date. These can be a very valuable feature in the event there is an E&O claim.

On the downside, many employees that I spoke with said that they were reluctant to give the system a fair chance since they did not understand it. Be sure to communicate to your staff the objective of this system and that you will provide them with the necessary training as well as answers to any questions that they have.

Also, if you or your staff takes any information on the phone, there is no back up of that information. There is still the potential for misunderstandings in phone conversations. To alleviate that, I would suggest that your agency send a confirmation letter out on any additions/deletions/rejections of coverage to ensure a common understanding.

Some other issues you will need to consider with transactional filing are:

  • How long should you retain copies of the correspondence in the back room? Many agencies go with a seven-year period. The statute of limitations should be checked when evaluating this issue.

  • Develop some type of disaster plan in the event that you lose your electronic records either temporarily or permanently. In virtually every municipality around this country, there are data storage companies that provide for off-site storage. Thus in the event that you lose power, you can be up and running with the same data fairly quickly. Due to this, you should definitely back up daily to ensure the quality and accuracy of your records.

Transactional filing is for the most part a good thing. The agencies that I spoke with are sold on it as it offers many pluses. If the training and implementation are handled properly, a decrease in your E&O exposure could be one of those pluses.

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