Specialty Insurance Blog

Flood Insurance & Agents E&O

After the significant hurricane losses sustained by the insurance industry, insurance agents are working hard to ensure that their clients are provided with the opportunity to obtain flood insurance. This is critically important in order to properly protect the clients and reduce their own insurance agents E&O exposure. A recent article (see here) provides some guidance on the provision of flood insurance to agency clients in a manner to reduce E&O exposure. As with all insurance agents E&O exposures, documentation of the offer of flood insurance is the best practice for reducing E&O exposure. The article counsels every agent to offer flood insurance coverage, and to document the offer and the insured's decision. While this advice is standard operating procedure,... Read more →

Personal Lines Insurance

Personal lines insurance has been perceived as unprofitable for insurance agents for many years due to small average premiums, high service requirements and relentless competition from direct writers. That perception is changing as insurance agents develop strategies for efficiently marketing and servicing personal lines insurance. I-A Magazine provides an overview of this changing perception, and some examples of successful strategies for insurance agents to write personal lines insurance (see here). According to the article, there are a number of factors contributing to increasing insurance agent participation in the personal lines market: Personal lines provide cross-selling opportunities Carrier underwriting and technology has improved Service centers are providing significant efficiency Separate agency processing organizations also add efficiency Compelling commission structures provide increased... Read more →

Specialization in Insurance

Many insurance agents and brokers run highly successful companies based on a strategy of specialization. We are big fans of specialization, and have developed our own business based on specialization in insurance. We recently came across a great description in an online forum of a specialization strategy executed by an insurance broker (see here). This broker, who calls himself Tabasco, has built a specialty in aviation over a period of three years. Tabasco’s strategy is based on becoming an expert in the risk issues within a specific class of business, developing solutions to those issues, and then marketing directly to the specific class. Key points: Learn your market The most desirable class of client also tends to focus on value... Read more →

Policy Rescission

Insurance agents never want a client’s insurance policy rescinded for obvious reasons: a client will have no coverage and the agent may have to tap his or her insurance agents professionally liability (E&O) coverage. Insurers have limited rights to rescind coverage. These rights vary by state and are typically based on material misrepresentation. A summary of the legal aspects of rescission can be found here. Care must be taken when assisting an applicant in completing an application to avoid the prospect of contributing to a policy rescission. Key points for insurance agents include: The agent or broker should never make subjective decisions on the importance of facts to a particular insurer (the insurer can decide which facts are important) The... Read more →

Letter from the Oracle

Few insurance agents and brokers have not heard of Berkshire Hathaway, a company whose impact on the insurance business cannot be understated. Berkshire owns a number of insurance companies including General Reinsurance, GEICO (of gecko fame), USLI and Medical Protective. Every year Warren Buffett, the investing luminary known as the Oracle of Omaha, and Chairman of the Board of Berkshire Hathaway, writes a letter to shareholders. This annual letter is not the one page summary of corporate performance that others provide to shareholders. It is a mix of detailed analysis, investing wisdom and down home wit, this year running 22 pages. Buffett's letter is read thoroughly by shareholders, investors and insurance executives every year, and always contains interesting and witty... Read more →

Prior Knowledge of a Claim

Insurance agents may have a difficult time understanding the possible legal outcomes of potential professional liability insurance claims scenarios. Even professional liability underwriters have a difficult time, and many will not provide coverage interpretations on particular fact sets when asked by clients because it is extremely difficult to predict how a court will rule in a these situations. The extent to which prior knowledge may be the basis for denying a claim is one such area. If an insured has prior knowledge of the likelihood of a future claim, it will not be covered based on a recent and unusual case in New Jersey. Wilson Elser has provided an excellent summary of this lawyers professional liability (malpractice) insurance case (see... Read more →

Broader Liability in Securities Fraud Cases

The Supreme Court has agreed to consider whether shareholders of companies that commit securities fraud can sue third parties, called secondary actors, which may have participated in the fraud, a case which has at minimum significant implications for parts of the professional liability insurance business (see here and here). In simple terms, the key issue is whether third parties that aided and abetted a fraud, even unwittingly, should be liable to shareholders. The secondary actors typically include investment banks and lawyers, but this decision could go well beyond these specific professionals. Other professionals could include banks and other lenders, accountants and consultants. Currently there are appeals court decisions which conflict, and the Supreme Court will hear the case later this... Read more →

Sub-Prime Lending

While it is not an insurance topic, and not of primary concern to insurance agents, the sub-prime lending issue has gotten more than its share of press – most of it negative – and is worth a mention here. Sub-prime lenders have been portrayed as evil, preying on the poorest segment of society by providing overpriced loans that should not have been made. As usual with media hype, particularly the national media with an agenda, nothing is a simple as it seems. An article in the New York Times provides some much needed perspective (see here). The article points out what most have not reported: The vast majority of … subprime borrowers have been making their payments. Indeed, fewer than... Read more →

Excessive Tort Costs

A new study on America's tort system is making waves, particularly in the insurance business, and should be reviewed by all insurance agents. The study, Jackpot Justice: The True Cost of America’s Tort System (see here), concludes that the total annual accounting cost of the US tort liability system is $865 billion, equivalent to an 8% tax on consumption or a 13% tax on wages. This estimate is significantly higher than other estimates of tort cost because, its authors say, it is more comprehensive. It is equivalent, on an annual basis, to $9,827 tax for a family of four. . The United States spends 2.2 % of GDP on direct tort costs, significantly more than other advanced countries. Advanced countries... Read more →

National Broker To Tap Small Commercial Market

Insurance agents will be interested to hear that the small commercial market is untapped. We are not sure why it is untapped - maybe this is because insurance agents don't serve this market segment - but we are now told that it is untapped. (see here & here) See also here to learn that this market segment has been underserved. eSpecialty Insurance is your specialty insurance expert. We have developed a streamlined marketplace to provide multiple proposals from a range of competitive insurers, along with expertise to help you evaluate your exposures and choose the best combination of comprehensive coverage and price. We look forward to working with you. Read more →