insurance professionals
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Insurance Professionals. How is the current market affecting your E&O exposures and coverage?. INSURANCE PROFESSIONALS: HOW IS THE CURRENT INSURANCE MARKET AFFECTING YOUR E&O COVERAGE?. MODERATOR : - PowerPoint PPT PresentationTRANSCRIPT
2009 Professional Risk 2009 Professional Risk Symposium: EPL, E&OSymposium: EPL, E&O
and Fiduciaryand Fiduciary
San Diego, CA ~ April 29 & 30, 2009
Insurance ProfessionalsInsurance Professionals
How is the current market affecting your E&O
exposures and coverage?
INSURANCE PROFESSIONALS: HOW IS THE INSURANCE PROFESSIONALS: HOW IS THE CURRENT INSURANCE MARKET AFFECTING CURRENT INSURANCE MARKET AFFECTING
YOUR E&O COVERAGE?YOUR E&O COVERAGE?
MODERATOR:
Curtis Pearsall, CPCU, AU, AIAF, ARM, Vice President and Director of E&O, Utica Mutual Insurance Company
PANELISTS:
Robert Eilers, ACS, AIAA, AIRC, President and Owner,
The Eilers Group
Joseph Labieniec, Assistant Vice President,
Darwin - E&O Underwriting
Alex Wayne, CPCU, ASLI, RPLU, Vice President,
A.J. Wayne & Associates
Paul S. White, Partner,
Tressler, Soderstrom, Maloney & Priess, LLP
How Is the Current Market Affecting your E&O Exposure and Coverage?
The Wholesale Broker’s The Wholesale Broker’s PerspectivePerspective
More people are interested in becoming insurance agents in this economy
• A lot of qualified people are looking for work
• People from the industry have traditionally been able to find coverage
• People from outside of the industry – used to be difficult to place – coverage is now readily available
• Financing issues and cancellation for non-pay are common with new agents
The Wholesale Broker’s The Wholesale Broker’s PerspectivePerspective
Payment issues - The non-standard marketplace will get submissions for accounts cancelled for non-pay:
• Vast majority are very small agencies
• The insured must provide an explanation for non-pay cancellations – health issues are the main reason
• We recommend that no financing be offered to agencies cancelled for non-pay…some will finance anyway
The Wholesale Broker’s The Wholesale Broker’s PerspectivePerspective
Saving premium• Limits reduction – not recommended sometimes
necessary
• Increase deductible – is the savings worth it?
• Stay claims-free to get a loss free credit!
• Avoid areas that are considered more hazardous▪Brokerage exposure▪Surety, Med Mal, Professional, Aviation, Marine▪Lower rated carriers and non-standard carriers▪Tougher services – TPA, reinsurance, captive management
• Have good loss control procedures in place
The Wholesale Broker’s The Wholesale Broker’s PerspectivePerspective
How to present your renewal after you’ve had a claim
• Provide a legible, professional application
• Explain your claims and steps taken to avoid a similar incident in the future
• Take a proactive, remedial approach – have an audit performed, even if one is not required
• If there is an element of fraud or dishonesty, address it and explain it
The Wholesale Broker’s The Wholesale Broker’s PerspectivePerspective
Market conditions
Market is still soft
We expect changes this year
Timing for a hard market is not good
TheTheUnderwriter’s PerspectiveUnderwriter’s Perspective
Implications for the agency in response to the economic downturn – what measures are being undertaken that have potential impact
• Reductions in staff / not filling positions
• Failure to implement or a discontinuation of various risk management tools
• Steer business to carriers paying more commission to make up for decreased agency revenues
• Moving away from lines of business & professional services an agency knows best to increase revenue
TheTheUnderwriter’s PerspectiveUnderwriter’s Perspective
Agencies will have to deal with ramifications that the economy is having on their clients
To save money, some clients may:Reduce limitsRestrict coverageFail to purchase or drop “discretionary” coverage
Move coverage to a weaker carrier, lower premium
Insurance agencies will need to consider:How will they handle requests for the aboveWhether or not they need to amend their controls & procedures – particularly in the area of
documentation
TheTheUnderwriter’s PerspectiveUnderwriter’s Perspective
The Hard Market is coming…eventuallyAgencies will need to be aware that:
• Incumbent carriers will restrict terms / conditions and increase premiums
• More business will need to be moved at renewal• Carriers will be less likely to make
accommodations in the event of a claim• Because of the above – claims frequency will
increase• Bottom line – an agency’s clients will be paying
more and getting less – and unhappy clients bring claims
TheTheUnderwriter’s PerspectiveUnderwriter’s Perspective
Now is NOT the time to reduce staff, discontinue risk management, etc.
The economic downturn combined with the hard market will only make things more difficult for an agency
Now IS the time to spend money and invest time – wisely – on the things that will help an agency avoid E&O claims in a down economy and a hard market
Mr. E&O Mr. E&O Claims PreventionClaims Prevention
E&O External Audits• Not as scary as the IRS• Overpromise of abilities or services• Previous examples where agency have under-
delivered
What is an E&O Audit Process• Evaluating of agency E&O loss control measures
and their current effectiveness• Agency Management Issues (i.e. electronic
management system)
Mr. E&O Mr. E&O Claims PreventionClaims Prevention
The E&O Claims Rule Underwriting Reasons
Claim problems
Voluntary Audits Election of the agency
Desire to improve operations
Agency Mgt. Issues PracticeProcedures
Mr. E&O Mr. E&O Claims PreventionClaims Prevention
Building Agency E&O Claims Prevention Program
• Identify / appoint agency’s E&O Claims Prevention Point Person
• How to identify that person within your agency
Develop internal procedures
• Utilizing development teams• Keeping it practical and efficient• Development of each department’s internal file
audit form
Mr. E&O Mr. E&O Claims PreventionClaims Prevention
Implement agency procedures
• Train staff• Monitor use of procedures and workflows
Conduct internal client audits
• Internal Audits quantify by staff member• Internal Audits quantify by department
The Legal PerspectiveThe Legal Perspective
Two Risk-Enhancing Factors are at work simultaneously
The economy causes insureds to seek lower costs by sacrificing all but what are perceived as “essential” coverages
Certain types of liability claims are seeing increased frequency and will not decrease:
Internet/Cyber LiabilityIntellectual PropertyPrivacy tortsConsumer protection-related class actions
The Legal PerspectiveThe Legal Perspective
These claims are insurable under specialty
forms from major carriers and some niche
players – however these coverages are
considered non-essential by agents and
insureds (until there is a loss)
The Legal PerspectiveThe Legal Perspective
Agencies relying heavily on construction industry and auto industry will suffer tremendously
Will cause agents to search for business in other sectors with which they have less client knowledge and less coverage knowledge
The Legal PerspectiveThe Legal Perspective
These factors / issues will cause E&O claims to surface in a variety of areas:
A. Infrequent but “high dollar” E&O for construction industry insurance failures – both first and third party coverage being inadequate, And some surety bond related E&O
B. E&O for failing to provide infringement insurance and intellectual property protection to businesses that rely heavily on IP assets or which face uninsured infringement claims
The Attorney SpeaksThe Attorney Speaks
Factors causing E&O claims (cont’d)
C. E&O caused by construction and auto industry agents seeking new business with which they have little experience
D. E&O caused by inadequate first party coverage upon which insureds will rely as tort defendants become insolvent (more pressure on underinsured motorist coverage as a simple example)
• Questions for the panelists??
Please identify who you are directing the question to
Thank you