Help Safeguard Your Agency from Uninsured/Underinsured Motorists Coverage Issues

Issues surrounding uninsured/underinsured motorists are a common source of E&O claims against agents. Navigating Uninsured/Underinsured Motorists (UM/UIM) Coverage placements can be challenging, especially if you write in numerous states. While the coverage is required in some states, the majority allow it to be rejected – and most states do not require UM/UIM limits to be equal to the Bodily Injury/Property Damage (BI/PD) limits. Stacking is allowed in some states.

 Your clients have a 1 in 7 chance of being involved in an accident with an uninsured driver and a 1 in 6 chance of being underinsured. 

• A study by the Insurance Research Council notes that in 2023, 15.4% of drivers were uninsured and 18% were underinsured. Overall, this makes 1 in 3 drivers uninsured/underinsured, a number that has climbed 10% since 2017. Some states have significantly higher numbers of uninsured/underinsured drivers than the national average.
  
  • Uninsured: Mississippi 28.2%, New Mexico 24.1%, Michigan 22.3%, Tennessee 21.3% 
  • Underinsured: Colorado 49.7%, Florida 38.3%, Nevada 37.3%, Louisiana 36.4%

Considering that many states only require low liability limits – often $25,000 or less – an accident could easily result in an underinsured incident. 

WHAT CAN YOU DO? The following risk management tips can help:

EDUCATION:

• Staff should handle this issue with diligence, be well-versed in the coverages, and be provided with clear procedures.
•  Advise your clients and prospects on the value and purpose of UM/UIM Coverage.

DOCUMENTATION:

• Be aware that carriers are now more likely to hold agents accountable for not following requirements to obtain and store rejection forms for UM/UIM Coverage. If a form is missing, the carrier may pay the claim, but then seek reimbursement from the agent’s E&O insurance.
• Obtain a signed rejection letter even if there is not a specific form required when an insured rejects the limits or takes them at a limit lower than BI/PD. This is your strongest protection in the event of a claim.

LIMITS

• The default should be to quote UM/UIM limit equal to the BI/PD limits – however, you should also offer additional limit options. This requires the client to make a choice regarding their limits.
• Encourage clients, in writing, to review their limits at renewal.
• Ask if the client has Umbrella/Excess Coverage in place and, if so, determine if the Umbrella carrier has limit requirements for the primary coverage.

UMBRELLA/EXCESS UM/UIM

• Include UM/UIM if it is offered by the carrier. If you do not have a carrier that offers this option, specifically point this out to the client so they have the choice to pursue coverage through other sources that could provide this coverage. We have seen E&O claims where a failure to advise of the availability of this coverage results in liability against the agent.
• Make sure the client is aware of any requirements regarding the primary limits.

DON'T LET THIS HAPPEN TO YOU

The agent placed Auto Coverage for a client with $250,000/$500,000 UM/UIM limits – also placing a $1 million Umbrella policy that did not provide UM/UIM coverage. The agent indicated they usually recommended additional UM/UIM Coverage, but did not address it since the Umbrella carrier they procured terms from did not offer the coverage.

The Umbrella carrier started offering UM/UIM Coverage by the next renewal of the Umbrella policy, however, the agent did not advise the client of this coverage availability at this renewal or subsequent renewals.

The client was involved in a severe motor vehicle accident with a driver who only carried $15,000 liability limits. The agent’s Errors & Omissions insurance paid out $700,000.

TAKEAWAYS: A well-educated staff and good documentation are critical to helping you protect your agency when it comes to UM/UIM Coverage issues.

Source: Insurance Information Institute, https://insuranceindustryblog.iii.org/irc-report-reveals-that-one-in-three-drivers-were-either-uninsured-or-underinsured-in-2023/

E&O Tip: How to Ask for a Signed Application 

The manner in which a signed application is requested from a client can significantly influence the outcome of an E&O claim against your agency – particularly if the application was completed on behalf of the client.

It is essential to provide the client with the entire application for their signature, rather than only the signature page. What’s more, it is crucial to advise the client to thoroughly review the application for accuracy before they sign and return it if no amendments are required.

There have been instances where claims have arisen due to inaccurate information on signed applications, with clients asserting they were not asked to verify details and signed at the agent’s instruction. Clearly communicating the necessity of reviewing all information prior to signing helps strengthen your agency’s position if a claim arises. 

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RISK MANAGEMENT RESOURCES HIGHLIGHT: Checklists

Checklists are an invaluable tool for agents to help ensure you are not missing vital information on new and renewal business. They can help you avoid E&O claims while also enabling you to provide better service to your clients.

E&O policyholders with the Utica National Companies have access to our E&O Risk Management website, which includes sample checklists for Commercial Lines, Commercial Property Valuation/Limits, Workers’ Compensation exposures, and Homeowners exposures.

To access the site, log in to our online Customer Care Center and click Risk Management.

CLICK HERE for details on how to sign up for Customer Care. 

Ready to Help

Are you looking for risk management guidance on a particular topic? Reach out to Tabitha DeGirolano of our E&O team for help at tabitha.degirolano@uticanational.com.

This information and any attachments or links are provided solely as an insurance risk management tool. They are derived from information believed to be accurate. Utica Mutual Insurance Company and the other member insurance companies of the Utica National Insurance Group (“Utica National”) are not providing legal advice or any other professional services. Utica National shall have no liability to any person or entity with respect to any loss or damages alleged to have been caused, directly or indirectly, by the use of the information provided. You are encouraged to consult an attorney or other professional for advice on these issues.