During this soft market, insurance agent claims are probably not top of mind, but they can come unexpectedly and obviously impact insurance agents E&O (professional liability) coverage. A recent article in Insurance Journal (see here) points to some frequent causes of insurance agents claims and provides a reminder of some common ways to prevent the claims.
Typically, claim frequency declines somewhat during a soft market because insurers offer broader coverage and accounts tend not to move with coverage reductions. During a hard market, underwriting changes can force some insureds to move to insurers with more restrictive coverage and other insureds to accept reduced coverage. This can lead to unexpected claim declinations, which in turn can lead to insurance agent E&O claims.
This article is a good reminder – short and to the point – and probably should be read by agency personnel. Some key points:
Frequent Causes of claims against insurance agents:
- Inaccurate recommendations
- Policy change, application and renewal errors
- Risk assessment errors
- Clear internal communications
- Personnel training – both product knowledge and internal procedures
- Limits guidelines
- Standard checklists
- Coverage rejection acknowledgements
Coverage rejection acknowledgements are particularly important for employment practices liability insurance (EPL). We have seen all types of insurance agents E&O claims at Mercator because of our large Insurance Agents E&O practice, including the failure to offer EPL coverage. Other types of claims are relatively simple, like failing to make sure a claim notice was properly forwarded to an insurer, and some are more complex. Claims examples are worth reviewing (see here).
Exposure to insurer insolvency does not get much attention now as the market is soft and there have been few insolvencies. However, this can change fast if the market hardens due to poor results. Insurer insolvencies can impact both insurance agents E&O and insurance agents E&O underwriters (see here).
Brought to you by Tennant Risk Services.