Insurance agents build their livelihoods around helping people and businesses protect themselves from attacks, fines, and other disasters. However, agents also need insurance to defend themselves.
Because people and businesses trust agents with getting them the protection they need, there is always the risk an agent’s mistake could have significant consequences for the party that trusted them. Therefore, insurance agents need errors and omissions (E&O) insurance to protect themselves against errors they make on the job.
In this blog, discover the five most common insurance agent E&O claims examples, how agents can prevent such claims, and how to protect insurance agents with the help of ProWriters.
Five Common E&O Claims for Insurance Agents
Example 1: Failure to Advise Adequate Coverage
The most crucial part of an insurance agent’s job is identifying a client’s risks and advising insurance to adequately cover those risks. However, if an agent overlooks a potential problem and provides poor risk analysis, the client may find themselves in a scenario for which they did not prepare.
In that event, the client may believe the agent was at fault and should be held responsible for the financial burden resulting from their lack of coverage. If the client decides to bring a claim against the agent, the agent and insurance company they work for could be on the hook for an unforeseen expense.
Example 2: Incorrect Explanation of Coverage
Sometimes, an insurance agent incorrectly represents what protection a given coverage level affords the client. Poorly explaining a coverage level may result in clients not having the coverage they thought they had when filing a claim. If the client then needs the coverage the agent led them to believe they had but did not, they may go after the insurance agent.
In that event, the agent and the company they work for could again be held liable for the economic burden the client incurs from their lack of coverage. To prevent this scenario, agents should ensure the client fully understands what they are paying for. They can ask the client if they have any questions, and can record emails and calls between them (with the client’s consent) to establish the agent did, in fact, accurately represent the coverage.
Example 3: Administrative Errors
Advising the right coverage for a client is no simple task. Often, multiple agents work with a client at the same time. In communicating back and forth and balancing various software programs to gather the information they need, agents can slip up from time to time and make administrative errors.
For example, administrative errors can appear on certificates of insurance. Information may be incorrect, or an agent may have left out an important detail, resulting in reduced, canceled, or invalid coverage. Agents can face professional liability lawsuits if the client incurs unforeseen costs because of an administrative error.
To prevent this scenario, minimize the number of agents working with the same client. Fewer people means fewer breaks in communication where errors could occur. In addition, have the client and the agent double-check their information to ensure everything is as it should be.
Example 4: Failure to Communicate Policy Changes
When providers change elements of their insurance—coverage, rates, renewal policy, or anything else—agents are responsible for communicating these changes to the client so the client’s coverage remains up to date.
If an agent doesn’t communicate a change in coverage to the client who needs to know about it, the client could sue the agent for this failure. To prevent such a lawsuit, the agent should have a system for identifying policy changes affecting their clients. Once they know about such changes, they should immediately contact the clients with the new information.
Example 5: Failure to Send Client Information to Potential Insurer
An insurance agent is the link between client and insurer. If the insurer receives wrong information about the client seeking insurance, it can be the agent’s fault.
Incorrect information can void the policy when the time comes to file a claim. Therefore, the client can be without the protection they thought they had when they need it most. In such an event, the client will often sue the agent for their negligence and the financial burden.
Protecting Insurance Agents Through E&O Insurance
Though insurance agents specialize in managing their clients’ risks, they often ignore the risk they take in their profession. Even with careful review processes to catch errors, the potential for a slip-up is always present. Many insurance agent E&O claims examples involve mistakes that have serious consequences for the agent.
E&O insurance is the best way to protect insurance agents from honest mistakes that may cost their clients money. It helps prevent mistakes by mandating agents set up systems to avoid errors, and provides the legal assistance and fees an agent might need in a lawsuit.
It’s vital you, as an insurance broker, have the protection you need so you can keep your clients protected. You’ll find no shortage of companies selling E&O insurance. But you’ll also find they’re not all created equal. You need a simple, cost-effective tool to help you identify the best insurance on a case-by-case basis.
We at ProWriters have been innovators in helping people and companies find the best E&O insurance since 2008. We’ve streamlined the process to help you find your best insurance options more quickly.
To get more information about how our platform can help you find the insurance your clients and you yourself as a broker need, click here to contact us.