The first person most people think of when they think of insurance is the insurance agent.
The insurance agent, who represents the insurance com- pany, is the direct link between the company and its insureds. As such, the agent has many responsibilities, including:
■ selling insuranc;
■ issuing and countersigning policies;
■ collecting premiums; and
■ providing a link between the insured and the insurance company.
Most of these duties are self-explanatory, but you may be curious .about
. Countersigning means the agent signs each new policy prepared by the company before delivering it to the insured. In most states, the agent’s countersignature is required to validate the contract.
The agent’s duty to provide a link between the insured and the insurance company involves a number of responsibilities.
The agent is responsible for field underwriting each risk. This means using preestablished criteria to seek out the type of business that is likely to be acceptable to the company.
Although the company underwriter makes the final decision to accept a risk, the agent also has a responsibility to seek out quality business.
Before selling a policy, the agent must obtain information on the prospect’s particular exposures and review existing policies.
The agent must analyze the prospect’s coverage needs and make recommendations as to the amount and type of coverage appropriate for each exposure.
The agent may prepare a quotation that will show the prospect what the premium for the proposed coverage will be.
When the prospect buys, the agent must complete a detailed application. The application must be carefully, completely, and accurately filled out and submitted on a timely basis.
The agent must make sure the client understands the type of coverage being purchased and what the insured’s responsibilities are under the policy, as well as the services that will be provided by the agent and the insurance company.
The agent may also be expected to deliver the policy.
Once a policy is in force, the agent has a continuing responsibility toward the insured.
At least once a year, the agent should review the client’s coverage and evaluate the adequacy of the coverage provided.
The agent must also stay current with new coverages that might be appropriate for the client.
An agent should maintain a suspense or diary system that alerts the agent before the policy renewal time.
This is an appropriate time for the agent to ensure that the insured’s coverage is still adequate and that there have been no significant changes in the risk.
At any time during the policy year, the agent must be available to assist the insured with service needs, such as a name change or a change in the method of premium payment, and maintain accurate records of all such changes requested by the insured.
The agent may also help the insured file and follow up on claims. Some companies give the agent authority to settle certain types of claims.
Not only does the insurance agent have a moral obligation to fulfill these duties, but there are legal obligations as well.
Agents who are negligent in meeting their responsibilities may be liable for their inadvertent errors.
Later in the course, we’ll discuss errors and omissions (E&O) insurance. E&O insurance should be purchased by agents to protect themselves against legal liability arising from inadvertent errors or omissions.
The insurance business is constantly changing, so it’s critical that insur- ance professionals maintain lifelong educational programs to keep their pro- fessional knowledge and skills up to date.
Many states have continuing education laws that require producers to take a certain number of hours of insurance-related course work before their licenses can be renewed.
In states that do not have continuing education laws, insurance professionals must assess their own needs for continuing education and engage in ongoing improvement of their knowledge and skills.
Insurance professionals may also earn professional designations from educational organizations such as the American Institute for Chartered Property Casualty Underwriters and the Insurance Institute of America.
These organizations have developed a variety of programs to meet the educational needs of insurance professionals.
Some of the designations offered by the institutes include Chartered Property and Casualty Underwriter (CPCU), Accredited Adviser in Insurance (AAI), and Associate in Personal Insurance (API).
Agents also have responsibilities toward the insurance company or companies they represent.
Agents must:
■ be loyal to the insurer’s interests and avoid engaging in any business activity that competes or interferes with the insurer’s business;
■ obey all legal instructions provided by the insurer;
■ deposit funds belonging to the insurer in a separate account in the insurer’s name;
■ perform all duties with the degree of care and skill that a reasonably prudent person would exercise in the same circumstances; and
■ keep the insurer informed of all facts related to the agency relationship.