As an independent insurance agent, your goal is to help your clients with whatever type of coverage they need. Yet, when you start looking at coverage options you have not placed before, you can put yourself at risk for an E&O insurance claim. Proper education and gaining familiarity with the various types of insurance your clients may ask for is vital, and proper E&O insurance coverage for insurance agents will help reduce this risk.
Here’s a scenario for you to consider: a client asks an agent for coverage for a restaurant. The client wants full coverage for the restaurant, which means coverage for the business side, income and liability, among other things. The agent, who had not insured a restaurant before, failed to properly research the market. He found property and liability coverage for the client, but failed to get business, loss of income or personal property coverage. Not long after coverage was placed, the restaurant had a fire. The kitchen was damaged and much of the property had smoke damage. Unfortunately, the coverage offered was insufficient to cover some of this damage. The restaurant owner claimed that the insurance agent did not get the full coverage he asked for, and the potential cost of this E&O insurance claim was $45,800.
So how can you prevent this type of problem? When you work in the insurance industry, you must know your limits. If you do not understand a particular market, do not offer coverage until you have studied it and learned what you need to know to provide proper coverage. Sometimes, you won’t be able to provide coverage to that individual.
It’s better to lose a potential client than face a costly insurance agent’s E&O insurance claim. In this case, if you can’t gain the knowledge and experience necessary to provide adequate coverage for the client, tell them that you don’t have that knowledge. Then, provide them with the name of a colleague or someone in your agency who does, if possible. Remember, committing to find coverage for someone in a scenario you are unfamiliar with is risky and will increase your risk for E&O claims. While your insurance agency E&O coverage does help cover some of this risk, you will be better off if you simply don’t try to provide the coverage. The client will be better served, and you will have less risk, by passing the case off to someone with the right knowledge.