Errors of Commission & Omission
While ethical problems and compliance issues can occur during the sales process, many ethical issues arise out of the agent’s conduct following the sales interviews. Ethical lapses can occur from things the agent does as well as what an agent fails to do.
Errors of Commission
Ethical lapses caused by things the agent actively does — taking an action that is improper or harmful to the client.
Errors of Omission
Ethical lapses caused by things the agent fails to do — neglecting an action that should have been taken on the client’s behalf.
Two critical problem areas arise from both types of errors:
✕ Failure to Obtain Proper Coverage
Usually caused by improper analysis of the client’s needs, failure to request the proper form of coverage from the insurer, or delays in obtaining the necessary coverage.
✕ Failure to Maintain Proper Coverage
Usually occurs because of a failure to notify the insured of non-renewal or internal agency problems in renewing coverage.
These problems frequently occur on the property & casualty side of the business; however, they can occur on the life and health insurance side as well.
According to industry surveys, renewal-related complaints account for more than one-third of all errors and omissions claims for property & casualty agents. Since many life policies are permanent, renewal situations are less frequent than in health or P&C business — but the obligation to follow through remains equally important.
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