How Does Your Insurance Agents E&O Coverage Measure Up?

When it comes to choosing the right Insurance Agents’ errors and omissions insurance coverage for your firm, there are a number of essential considerations to take into account, some of which can be missed or overlooked—even by the most seasoned insurance professionals.

As a successful insurance agent or broker, you already know how vital it is to secure the appropriate E&O coverage and limits.  After all, you’ve dedicated your career to helping individuals and businesses understand and select the best insurance options available in a large and complex market.

Millions of households and organizations trust their agents and brokers to help select the appropriate amount and the right kind of coverage to protect their homes and/or businesses from catastrophic loss.  In turn, these clients hold agents and brokers accountable for any perceived errors and omissions in the discharge of their professional duties.

Every Firm is Potentially at Risk

Even the most experienced and knowledgeable agency owner, staffing an office with the best-trained team, can be vulnerable to claims alleging an error or omission in advising clients.  And, while some agencies will be fortunate and escape a substantial errors and omissions claim, others won’t be so fortunate.  According to Insurance Journal's 2017 Agency E&O survey, almost half of respondents (43.1%) have been subjected to an E&O claim in the past decade.

The vast majority of agency owners are aware of this risk, and purchase an agents’ errors and omissions insurance policy to provide sufficient protection.  Statically speaking, according to Insurance Journal’s 2016 Agency E&O Survey, a wide margin (83.5%) of agency owners purchase coverage to protect their agency’s assets in the event of an E&O claim.

A Dizzying Assortment of E&O Policy Forms and Provisions

However, it can also be the case that an agency owner does not have the time needed to review the many and varied E&O policy forms available.  Or, there may be emerging risks in the marketplace (e.g. cyber threats, online fraud, etc.) that are not adequately understood or covered.  When shopping for E&O insurance, agency owners can find themselves confronted by a confusing array of manuscript policy forms and provisions that make it extremely difficult to compare the value of protection offered under alternative insurance options.

Indeed, according to Insurance Journal’s 2016 E&O Survey, of the five “most important issues” cited by respondents for selecting an E&O program, only one was related to coverage terms.

The five factors cited include:

  1. Claims handling experience (of the carrier);
  2. Longevity of the E&O carrier;
  3. Extended reporting period (tail) options;
  4. Access to underwriting and claims personnel; and
  5. Availability of risk management information/advice.

While each of the five items above is important to consider while evaluating an E&O program to cover the agency, it seems prudent to move overall breadth of coverage in the policy up to a higher priority consideration, given the substantial differences from one carrier’s form to the next.

The stakes can be massive, as the difference in scope of coverage from one carrier to the next can be substantial.  The fact is, choosing a policy with relatively limited coverage can have devastating long-term repercussions.

A Few Questions to Ask Yourself When Choosing E&O Insurance

While there a great number of considerations to take into account (we outline many of these in our Protection for the Protectors white paper), here are a few key questions to think about that might not immediately come to mind—but can be critical.

  1. Will your policy cover claims related to the placement of insurance for your employees? 
    It’s not uncommon for employees to purchase insurance for their personal needs through their employer, however Agents E&O policies typically include an exclusion for claims brought by other insureds.  Some carriers will make an exception for employees, however you may need to specifically request it. 

  2. Will the policy cover claims related to the insolvency of a carrier you placed your clients with? 
    Most Agents E&O policies provide coverage in this scenario, but it is typically restricted to carriers with specific ratings or structures.  If you place business that falls outside of the provision, you will need to work with your E&O carrier to get an exception for this business. 

  3. Does your policy include cyber liability up to the policy limit?  Can you add coverage to protect from cyber extortion and theft?
    In an article in Rough Notes magazine from earlier this year, one of the key concerns noted by E&O experts quoted in the article is cyber liability.  This is a huge (and growing) concern for agents, and an important topic that we will be addressing in detail in a future blog post.

  4. Does your provider have specialized E&O experience with award-winning underwriting knowledge and expertise?
    It goes without saying that E&O insurance requires a high degree of specialized knowledge and expertise.  Knowing that you’re working with an experienced and trusted Agents’ E&O partner will provide a sense of security and peace of mind.

Download E&O Coverage Comparison Sheet

To help you determine how your current Agents E&O coverage stacks up, we’ve created a helpful Coverage Comparison Sheet, which provides a useful reference for assessing your existing coverage versus All Risks’ exclusive Insurance Agents E&O Program.

Legal Disclaimer: Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for the actual language.