Recently, there have been many articles written about the issue of new entrants into the digital age of insurance applications. Many of those articles have referenced that while this is a significant threat to the independent agent, many independent agents are committing significant dollars to meet the challenge head on. The objective is to enhance the customer experience; using technology to strengthen the agent’s value and ease of doing business.
So how does this affect the E&O exposures that agents face? If agents are allowing their customers to shop and buy their insurance online through mobile devices / apps / websites, does this increase or reduce their exposure?
First, it is appropriate to state the legal liability standards that agents are traditionally held to. Basically an insurance producer (agent/broker) has a common-law duty to obtain the coverage that the client specifically requests within a reasonable time or to otherwise inform the client of the inability to do so. The producer’s duty is defined by the nature of the client’s request.
In the typical face to face conversation between the producer / CSR and the client, there is usually some dialogue that explains some of the finer points of auto insurance and the various coverages afforded such as UM/UIM. However when a client shops and buys their insurance online without interaction with agency staff, are they getting this degree of knowledge? From my standpoint, this is a key issue that agents should be aware of and sensitive to in pursuing more of a digital approach.
To date, I am not aware of any E&O cases involving a client essentially buying online and then finding that they had inadequate coverage. Personally, I feel a key issue involves to what degree the online buying tool educates the prospect on the different coverages, the importance of those coverages (such as higher UM/UIM limits) and what options are available. As stated previously, in most states, the agent is held to the standard of providing the coverage that the client asked for. By buying online, the customer is making that decision for themselves. Is the online capabilities helping the customer know what they are buying?
Bottom line, structured correctly with the necessary education components addressed, my personal belief is that an online tool minimizes the E&O risk for an agent. It might not be a bad idea to include a statement that prompts the customer to acknowledge that they understand the insurance coverages referenced and if they have any questions, they will contact the agency. Sort of like a “terms and conditions” approach that is typical to many on-line buying approaches.