A pendulum swings both ways. And just as a pendulum swingstoward two opposites, a particular point of view may become sounbalanced  toward one side, and while swinging back to its center, it often swings to the opposite position. Itrepeats, moving from one opposite to the other.

In the February issue of AA&B, Barry Zalma wrote anarticle titled "ValuedAdvice." In the article Zalma writes:

"Insurance agents have a general duty of care and a duty toadvise their clients. The general duty of care includes a duty toexercise reasonable care, skill and good faith diligence inobtaining insurance…The law is settled that an insured mustdemonstrate some type of special relationship for a duty to adviseto exist." 

As an insurance professional, I wish that Zalma's opinion wasincorrect, but in reality, he is accurate.

Related: Read a previous column by Richard Mintzer"what Defines an Expert?"

As an expert witness, I have been involved in more than 100assignments and I would conservatively estimate that 75 to 80percent of these included plaintiff allegations relating toimproper advice and counsel by insurance producers. The complaintsshare common phrases: 

"I thought my agent took care of it,""I didn't know, why wasn't I told?" and "I never hear from my agentexcept when it's time to pay the bill." 

As I have said often before: If you are involved in litigation,win or lose, you lose.

Swinging Pendulum

Recent legislation introduced in the Colorado legislaturesuggests that its pendulum is nearing its maximum arc and may soonmove in the opposite direction. This new legislation, HB 1057,requires insurance producers to visit with their clients on aregular basis to review replacement values on theirhomes. 

This legislation is in reaction to events that occurred about 2years ago. Two hundred homes were damaged or destroyed by awildfire that occurred just outside of Boulder. In testimonypresented before the legislation was introduced, one organizationreleased a survey indicating that approximately 60 percent of thedamaged homes were underinsured. Another person stated he hadbought his homeowners' policy several years ago and that thereplacement values had never been revisited. This type of testimonydoes the worst possible damage to the image and competence ratingof insurance professionals.

We shouldn't be in danger of legislation toforce insurance pros to do what they're supposed to do. There isthe obvious incentive of increased commissions and opportunitiesfor cross selling, along with avoiding litigation anddifferentiating your agency.

Related:Read the article "What's in a Nme?" by Richard Mintzer.

As an expert witness for the last 10 years, I've learned thatunderinsurance and the lack of attention to proper insurance valuesis common. In the May 2010 issue of this magazine I wrote "Are YouPaying Your Employees What You Owe Them?" and stated that ifinsurance producers fail to act responsibly, they can blamethemselves for turning a valuable asset into a commodity. Thearticle suggested that instead of fulfilling our task of managingour client's insurance portfolio, we should ask clients how manypounds of insurance they need.

I already can hear the readers roaring: "Too busy," "not worthmy time," "not required to do so," "too expensive" and finally,"just another example of government overregulation." Consider youragency's benefits if clients select your agency  as avaluable member of their professional advisory teams. As aprofessional,  keep a promise you made to your client whenyou first took on the account, which was that you are interested ina long-term relationship and being a professional insuranceadvisor.

Revaluing insurance limits on an annual basis is an ideal way tosupport new producers or licensed customer service people who arelooking to earn additional money. Of all the possible prospectlists in the world, there is no better prospect list than your ownclients. Finally, if you turn your junior sales team and yourcustomer service people loose to solicit your personal lineclients, the rewards will be far greater than you can imagine. Giveit a test and instruct your producers that every sales interviewshould end with this question: "Can you recommend three people whowould value our unique revaluation services?" 

Related: Read the Richard Mintzer article "ProtectYour Asets."

Colorado is not usually an insurance industry leader when itcomes to insurance regulation. Generally speaking, it follows otherstates when considering insurance legislation. If Coloradoconsiders HB 1057, other states may think about similarregulations. I think you'll agree that the insurance industry isheavily regulated which means that exactly what we do not need ismore regulation.

It takes many diverse personality traits to be a successfulagency owner or manager; however, there are two traits common tomost managers and owners: a big ego and the drive to succeed. Ifyou fit that description, why aren't you meeting your professionalresponsibility on your own instead of being forced to do it bygovernment regulation? If the overall benefits to the agency don'tturn you on, imagine how great you are going to feel when yourprogram is a huge success. 

In addition to being an insurance consultant and expert witness,I also counsel small businesses on risk management issues as avolunteer for SCORE, a national organization that supports smallbusiness startups and promoting continuing successful operations.SCORE counselors are not permitted to make specificrecommendations, so I always ask the business owners if they havean insurance person whom they trust. Almost all say they don't.Rate yourself on a scale of 1 to 10. Are you among the 60 percentof agencies who fail to meet their responsibilities or the 40percent that do a great job keeping insurance values current? Justimagine in addition to all of the benefits the agency would receiveby meeting its professional responsibilities your agency would beconsidered as an agency to be trusted.