Errors and omissions claims are a part of life for insurance agents and brokers. But have you ever considered what the most common E&O claims are — and how to best avoid them? Read on to learn about these common E&O claims that independent agents and brokers face and some ways to help lower your risk.
The Most Common E&O Claims Agents and Brokers Face
Here are some of the most common E&O claims independent agents and brokers face:
Failing to recommend the right insurance product or giving improper advice.
Agents and brokers must be able to recommend the right coverages and products to meet their policyholders’ needs. If an agent fails to recommend the right product or coverage, an insured may not have proper protection in place and could file an E&O claim if they suffer an uncovered loss. Giving improper advice can easily lead to an E&O claim.
Not procuring insurance coverage as described.
Some customers or policies fall through the proverbial cracks, with agents forgetting to bind coverage or submit documentation to change coverage limits. This is usually discovered when a policyholder files a claim and their insurer denies coverage — at which time the insured realizes this failure to procure coverage.
Failing to properly disclose policy conditions or exclusions.
Sometimes a customer will have the right coverage and limits but not realize they are bound by a particular policy condition or that their policy excludes coverage under some conditions. Agents should discuss conditions and exclusions so insureds understand how to comply with their policy.
Late reporting of claims to the insurer.
Sometimes policyholders will report losses to their agents instead of their insurers. This makes sense to many insureds since they have only been working with their agents up until this point. But if the agent doesn’t report the loss in a timely manner to the insurer, sometimes the policyholder faces late reporting issues. Many insurers consider notice to the agent as notice to the insurer, but late reporting issues can still cause problems for insureds. Agents also sometimes will write letters of support to insurers to try to convince them to cover claims, but this is often problematic.
Administrative errors or data entry mistakes.
A simple error in data entry or other administrative mistake can be costly for agents and brokers. If an error causes an insurer to deny a claim or an insured to have less coverage than expected, an agent could be on the line for an expensive E&O claim.
Ways to Help Lower Your Risk of E&O Claims
Here are some things you can do to help lower your risk of an E&O claim:
- Document everything, especially coverage conversations.
- Have your policyholders sign declinations of coverage.
- Keep files up to date.
- Discuss coverage and policyholder needs at renewals and throughout the year.
- Check-in with your policyholders to learn of new coverage concerns after important life events.
- Be aware of market conditions in your area to share issues with your customers.
- Review your E&O insurance policy and coverage limits and make changes as needed.
E&O Insurance Coverage For Agents Through The American Agents Alliance
If you need to purchase E&O insurance or want to review your options, check out the American Agents Alliance for your free personalized quote today. Review the terms and conditions and see if you qualify for a free quote and help protect your agency from E&O risk.