For some time now I have been writing articles on the negligence of intermediaries and how to avoid claims. Regular readers will realise how the claims fall into a pattern. Since the pattern, once revealed, repeats itself, I have decided to put the pen away for the time being but thought I would take the opportunity to use the last article to summarise.
The placement of insurance is clearly a system and it only takes part of the process to fail for problems to arise. The scope of intermediaries' errors is never fully revealed, as insurance failure normally requires a client to have an unpaid claim before a liability arises.
This double contingency no doubt disguises the amount of intermediary negligence that actually exists. Errors are discovered and rectified before they cause a problem or the error passes unnoticed with the insured sublimely unaware of the absence of his cover. Sometimes after the event it is possible to stick things back together if action is taken quickly enough.
Typically, claims arise because no cover is in place or, where it is, insurers do not pay because of some exclusion or breach of policy conditions. Occasionally, a broker with a binding authority obliges the insurer to pay, but they seek recovery because the intermediary has exceeded its authority in placing the risk. There are the dishonest individuals that any management system or internal controls should seek to limit the opportunities for dishonesty.
Of the first type of claim, where no cover is actually in place, these can be categorised into:
Dealing with these problems requires a system-based approach, with properly monitored procedures in place to ensure a minimum of error.
Internally, intermediaries should seek to report not only the claims circumstances but also the near-misses and should actively try to reduce the incidence of errors, thereby protecting both their client, their PI insurers and, ultimately, themselves.