Did you know that errors and omissions claims are on the rise in insurance agencies according to Independent Insurance Agents of Texas? Of course, you can protect yourself from liability with E&O insurance, but it’s always better to work to prevent these errors from occurring in the first place. After all, liability insurance can’t protect you from the harm your professional reputation will suffer if your agency is known to have multiple claims for errors and omissions against it.
Take a look at some of the errors of omission that can increase your company’s liability exposure.
Changes in the Policy
One of the basic responsibilities that an insurer has is to keep their clients informed of any policy changes that might affect their coverage or ability to collect on a claim.
If a policy is about to be canceled, or if it’s time for renewal, or if an insurer is facing insolvency and might not be able to pay out on a claim, the insured party must be informed promptly so that they can take whatever steps are needed to protect themselves. Failure to inform clients about any of these circumstances and situations can be a serious error of omission.
However, it should be easy to avoid this type of error. For example, setting up automated notices warning clients that a policy is about to expire or will need to be renewed can help ensure that clients are always aware of their status and have the time they need to take any necessary steps.
Poor Risk Analysis

Insurance can be a tricky subject to understand. Individuals don’t always know exactly what types of coverage they will need to limit their exposure financially, which is why it’s up to agencies to ask good questions, evaluate the client’s needs, and recommend the appropriate policies and levels of coverage for each client’s specific situation.
Insurance isn’t a one-size-fits-all kind of thing. That’s why agents need to be trained to perform the kind of risk analysis that will allow them to offer the right products to their clients. Of course, clients are free to turn down any coverage or policy that they don’t want, but if those clients aren’t informed about why they might need that coverage, or if all aspects of that coverage aren’t adequately explained to them, your agency risks being found liable.
The best way to prevent breakdowns in the risk analysis arena is to make sure that new agents are well-trained to do risk analysis and to provide existing agents with ongoing training in order to ensure that they stay on top of their game. Agencies should also always provide agents with the resources they need to do a proper, in-depth risk analysis for each client.
Inadequate Explanation of Coverage
Since clients aren’t insurance experts themselves and don’t necessarily understand the technical jargon found in their policies, it’s up to agents to make sure that they explain and clarify for the client exactly what will and will not be covered under their policy. Failing to adequately explain a client’s coverage to them could result in your agency being charged with misrepresentation of policy.
Agents should receive training on how to explain policy details to clients clearly, this conversation includes asking questions of the client that will help the agent determine if the client understands the details of the policy and policy in full, or if they need further clarification. It’s also important to periodically review your marketing materials to ensure that they’re up-to-date and represent your insurance products accurately.
Even under the best of circumstances, it’s still possible that errors of omission will occur which is why it’s important to obtain and maintain E&O coverage. The American Agents Alliance can help you understand and limit your agency’s liability. AAA can also help you find an E&O policy that’s more affordable for your agency. Contact us to find out more about E&O insurance.