For insurance agencies, your E&O protection is one of the most important coverages your agency will purchase. Without the proper protection, a significant E&O claim could prompt the agency to go out of business. So, the selection of where you place your E&O coverage deserves a tremendous amount of focus and analysis.
There are many E&O carriers in the marketplace, some that have been selling this product since the 60s and 70s and others that are somewhat new to the market. The sheer number of E&O carriers can be overwhelming. For this reason, it is wise to have a list of the key issues that are important to your agency.
A good starting point for many agencies is to look at the carriers that your agent’s association has access to. These carriers have been vetted and typically have shown a commitment to the market. Since E&O carriers may have different underwriting appetites, typically the agent’s associations are going to have 2-3 carriers, if not more based on the size of their state.
In the world of professional liability, there is no standardized policy form so you can count on the various carriers having different policy forms. When getting proposals from a variety of E&O markets, agents should be sure to ask for a specimen policy. This will enable the agent to review and compare the coverage forms of the carriers. Some key areas in the policy form to review include: 1) what professional services are covered, 2) the definition of “who is an insured”, 3) what limits / deductibles are available 4) is the policy form a “claims-made” or a “claims-made and reported” form (key differences between the two), 5) what “tail” options are available and 6) what additional coverages can be added onto the policy such as employment practices / cyber etc.
While the E&O premium is certainly going to be part of the decision process, agents should be extremely careful about putting too much weight solely on this issue. There is certainly the possibility that if the premium is low, the coverage may extremely limited and contain some gaps in areas that are important to your business. In other words, “you get what you pay for”.
It is always suggested to look at the length of time that the E&O carriers have been writing this type of business. A significant duration shows a commitment to this class of business. Writing E&O coverage is not for the faint of heart. The duration also demonstrates that the carrier understands this type of business and has built a claims operation that is there to provide “piece of mind” when a problem develops.
Managing an insurance agency is hard word and thus agents need access to knowledge and expertise to help them build their own E&O culture through loss prevention initiatives. Some carriers have tools that are available at no cost to help agents identify “E&O hot spots” within their agency.
While the E&O carriers are probably going to interview your agency to help them better understand your operation, don’t hesitate to interview the E&O carrier underwriter that you will be dealing with. You want someone that has solid E&O knowledge and can answer your questions as they arise. Part of the interviewing process should include better understanding the carrier’s claims operation since really at the end of the day, this is where the rubber hits the road.
Selecting your E&O carrier and the coverage they provide is probably one of the most important decisions your agency is going to make. Dedicate the time to ensure that you make an educated decision.