As any insurance agent recognizes, because you offer expert advice and service to your customers to help protect their businesses there is, unfortunately, always room for error. Errors and omissions in the service of performing your job is no laughing matter. The problem is, the costlier the error to the client, the higher the chances that they will seek retribution in a court of law.
When it comes to insuring your own business, of course you should have the proper protection in place. E&O insurance for insurance agents is a vital component of any insurance agency’s risk management plan.
Mistakes are a fact of life
Whether you’re an experienced or a newly licensed agent, you’re still human and vulnerable to making mistakes. If you are accused of losing important documents, providing erroneous statements, or forgetting to get a filing in on time, you could be accused of malpractice, which is why it’s so important for agents to have E&O insurance in the first place. Insurance agents face significant exposure to these types of claims, regardless of whether there is any validity to that claim.
You may be accused of failure to recommend the proper product, or to bind or renew a policy on time, or failing to recommend adequate policy limits, disclose policy exclusions, or simply failing to disclose material information. Whatever the accusation, being an insurance agent entails a high level of risk. Insurance agents are expected to place the right coverage at the right time, and to process the paperwork and payments correctly, as well as satisfy the requirements of both the policyholder and the carrier.
No agent wants to report an errors and omissions claim to their carrier, and the cost to defend such a claim (and to pay damages) can be devastating to an agent or agency. Claims against insurance agents mostly arise from policyholders, but can also come from the carrier with which the agent places business.
Coverage provided to insurance agents by an E&O policy
E&O policies typically provide coverage for defense costs and damages resulting from a negligent act, error or omission committed by the agent in rendering or failing to render professional services. It is important to note that claims made policies provide no coverage for claims resulting from an act, error, or omissions that took place before the retroactive date. It is therefore important when opting for E&O insurance for insurance agents to keep the same retroactive date at each policy renewal.