When you are looking for coverage for a client, your goal is to find the best policy to match that client's specific needs, while conforming to the underwriting process. Where you put yourself at risk for an insurance agent's errors and omissions claim is when you fail to fully follow the underwriting process. This can lead to offering insurance for something the insurance company considers to be too great of a risk.

Cutting corners in this way is never a wise move. Never cut corners during the underwriting process in order to get through the process more quickly. This will increase your E&O risk and will not serve your client well. Looking at a claim that involved this type of corner cutting will help you understand why it can be so damaging.

In this scenario, failure to follow the underwriting process thoroughly led to an insurance agency E&O claim. Understanding and avoiding this type of scenario will help reduce your exposure to E&O risks.

Claim Scenario:

A homeowner approached an insurance agent requesting homeowner's coverage. The agent performed an inspection on the property. While he was there, he was not able to see the interior of the home. Instead of scheduling a different inspection time, he simply inspected the home's exterior and provided the policy. That same year the client had a fire in the home when the pellet stove malfunctioned. That stove was the home's only heat source, a risk that the carrier said was unacceptable. Because the agent did not inspect the interior of the home, which would have allowed him to see the pellet stove and seek different coverage for the client, he was liable for this claim. The estimated cost was $167,000.

E&O Insurance Prevention Tip:

Familiarize yourself with the underwriting guidelines of the carriers you work with. Never cut corners to get through the underwriting process more quickly. Cutting corners is not an acceptable practice in the insurance field, but even the most attentive insurance agents are going to make mistakes that could make them liable for an insurance agency E & O claim. That is why E&O insurance for insurance agents is necessary. An attentive agent who is properly insured and who strives to follow the proper underwriting procedures at all times will face little risk of damage from E&O claims.