Everything You Wanted To Know About E&O Insurance For Agents

TLTR: E&O insurance for insurance agents is important, especially for independent agents and agencies. Here are 5 ways you can successfully avoid these claims.

If you’re contemplating getting errors and omissions insurance to keep your independent insurance protected, you’ve come to the right place.

According to Bizinsure, the average cost of E&O claims is $767.24 for a small business. The frequency and magnitude of errors and omissions stress the need to avoid such claims.

Below are some simple yet effective tips to help you avoid E&Os and their repercussions:

In this blog

Clarity of Clients’ Needs Always Reduces E&O Claims

Try to understand your clients’ needs. Proactively collect relevant information by asking questions regarding your clients’ lifestyle, and the property to be insured. For instance, ask homeowners insurance shopper about property details; reliance on property-information recorded in the web portals can make you susceptible to errors in recommending ideal insurance coverage.    

A good practice is to analyze the collected information and check if any further data is missing. It reduces the risks of omitting coverages or making errors during submissions. Submission with complete information is one of the best ways to get competitive quotes from the carrier leading to quality procurement.    

practical e&o insurance for insurance agents

Risk Analysis is a Must to Avoid E&O Claims

Merely collecting information and procuring insurance policy does not eliminate the possibilities of E&O claims. Leverage your expertise to actively evaluate various risks involved. For instance, you should advise your client about flood-related risks if the insurable property is in a high flood risk zone.     

Talk to your clients about endorsements, conditions, and exclusions. While the decision to purchase or add coverages depends on your client, you are responsible for providing them complete information. Also, ensure that the additional coverages are within the purview of products offered by carriers. 

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Diligent Procurement: It’s not Just you that can be slapped with an E&O lawsuit

Agents are the representative of insurers and expert advisors of clients from need analysis through risk assessment to policy purchase. Because of your specialized knowledge, your clients trust that you will help them get the best possible solution for their insurance needs. 

Hence, to deliver reliable service and build your credibility, proactively work to obtain competitive quotes from reliable insurance carriers. While procuring, remember that your clients’ needs matter just as much as the reliability of carriers you recommend to your clients. 

Meticulous Policy Review Must be done Periodically

Always review the policy issued by the carriers and check the details meticulously. No matter how careful you are, you may make errors during the submission. Remember that even a minute error can lead to a huge loss for the client and, eventually, a lawsuit against you. 

The best way to limit E&O claims is by reviewing the policy. After you receive a copy of the insurance policy from the carrier, go through the contract, and check the accuracy of details. In case of any inconsistency, immediately contact the carriers and request for amendment. 

good e&o insurance for insurance agents

Explanations of Policy Terms is Necessary to Avoid Confusion

As a bridge between an insured and insurer, you should fill the knowledge gaps of the insureds and establish symmetrical information. Walk your clients through the policy, explaining technical terms to ensure that they understand all the contract clauses. If a client finds ambiguity in policy terms, clarify. Ambiguity and misunderstanding are significant factors driving E&O claims. Hence, through clear explanations and proper understanding of the policy by the client, the chance of E&O becomes slim. These quick tips, although simple while reading, can avoid errors and omissions. However, prepare yourself for probable E&O claim against you through E&O insurance.

Conclusion

According to a statistic report in 2019 by Statista, around $22.75 billion dollars were spent by large companies due to litigations and lawsuits. However, that doesn’t mean insurance agents aren’t exposed to E&O lawsuits. It would be in your best interests to keep your career and business in safe hands with E&O insurance. Let us help you reach your full potential as an agent. Sign up for our membership plan and get listed within 90 seconds. If you have any questions regarding e&o insurance, leave a comment below.
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