5 rules for fixing client screw ups

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In insurance, an incredible number of things can go wrong, says Zoltan Barzso, president of Accurate Design Benefits. "There's no such thing as a typical mistake, and solutions are never unilateral. This business involves a three-person team: advisor, client and insurance provider."

So while you may not be able to single-handedly fix mistakes that occur, you can help facilitate solutions more smoothly by using these five rules from fellow advisors on how to handle client errors.

Read: Tough client conversations: how to prepare

Clerical and everything else

Two different types of mistakes occur in our industry: (1) clerical errors, usually by clients and often because they had no knowledge or had the wrong information; and (2) everything else. Barszo, who's worked in group benefits for 32 years, calls this last one "philosophical" or "political."

So what about providers? They make mistakes too, but those errors are the easiest to solve, says Barzso. Typically, insurance companies fix mistakes in booklets, claims, bills, contracts and other things because everything is in writing and the companies have reputations to keep.

Read: Four most common plan liabilities

The madness of a client error

Small biz clients are human, which means they hate completing forms and sometimes make $40,000 mistakes. Once, one of Barzso's clients forgot to update a computer file. "An employee who died had had a salary increase of $20,000 and was entitled to $40,000 extra in life insurance payments, but the client had forgotten to input the salary increase," he says. The client called him in a panic. "And you know what happens when someone is in a panic?" he says. "Mostly, they try to force you to do something you can't."

Rule number one: Stay calm.

Rule number two: Listen and don't get sucked into a confrontation.

And three: Make sure everyone is on the same team. "Clients sometimes mistrust their insurance company, which is ironic, because a provider handles a lot of a client's money," Barzso says. "You have to treat each other with respect, if only because of the amounts of money involved."

Rule number four: Fix the immediate problem. Clients can make all sorts of errors—administrative mistakes, late premiums, not educating employees properly, not replying to questions on time, and so on.

For the $40,000 client error, Barzso called the client's provider and began negotiating. He mentioned:

  • the client's overall premium payment ($500,000)
  • the length of time that the client was with the provider (a couple of years)
  • and the details of the mistake (only a two-three month delay in inputting the salary)

In the end, the insurance provider didn't have to pay the extra $40,000 to the beneficiary but did anyway, mainly because the payment was low relative to the overall premium that the client was paying.

Remember to encourage clients to get plan administration liability insurance for employees in charge of the insurance plan. Read: Why plan admin liability insurance matters

Lastly, rule number five. Each year, go through an administrative laundry list for yourself and your clients:

  • Update salaries;
  • Charge the retail sales tax on the long-term disability premium;
  • Update your website;
  • Tell your employees about changes to the policy;
  • Remind the client to an 'administrative error' rider in the general liability policy.

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