Insurance agency errors & omissions cover is a critical part of an independent agency's insurance coverage. And just like most other forms of insurance, the pricing of agency E&O coverage has been impacted by the hard market, with premiums increasing over the past few years. However, the market may be plateauing slightly as fewer agencies reported increases in premiums on their E&O renewal policies from 2022 to 2023, according to Insurance Journal's annual agency E&O survey.

Similarly, capacity is not a concern for agency E&O, with Big “I" members having the added bonus of access to agency E&O coverage through the Big “I" Professional Liability and Swiss Re Corporate Solutions program.

Nevertheless, as businesses plowed through the pandemic and into the hard market, agencies continue to face E&O exposures on various fronts. Based on 2017-2022 data from the Big “I" Swiss Re E&O program, the No. 1 reason agencies are sued is failure to procure coverage. The four next most common are: failure to adequately explain or disclose policy provisions; inaccurate information provided to the carrier; failure to recommend correct coverage type; and failure to recommend adequate value or limits.

“Agents, for a variety of different reasons, are failing to provide or even offer clients the coverages that they need, or, in some cases, what the client asked for," says Chris Burand, CEO, Burand & Associates LLC.

There may be many reasons for this. “One is that, especially since the COVID-19 pandemic, agencies as a whole have gotten sloppier," Burand says. Agencies are facing issues caused by staff turnover and staff shortages, as well as the deterioration in the quality training of account managers and producers, all of which are a direct result of the COVID-19 pandemic and the shifts it caused.

“The quality of training for account managers and producers to work virtually is not adequate," Burand says. “A lot of people in the industry since COVID-19 have not been adequately trained because the agencies haven't gone out and created the additional procedures, much less the additional training required to adjust to a work-from-home environment safely from an E&O perspective."

Finding and screening job candidates was the No. 1 issue facing independent agencies in 2022, according to the 2022 Agency Universe Study. Further, 40% of agency principals are older than 60 and 20% are older than 65, according to the “2023 Agency Growth Study" from Liberty Mutual, Safeco and State Auto Insurance. This combination is creating a difficult situation for agencies as they seek to replace waves of retirees with younger workers who are looking for alternative work arrangements.

Agencies are in a vise when it comes to attracting and training new employees and still delivering for clients during the hard market. Agents, experienced and novice, are busier than ever as they work to fulfill client coverage needs and stay on top of market changes.

Agencies need to be particularly cognizant of the importance of being consistent. “If agents are not asking for the right information from clients to begin with, not inputting the correct information and not following the same procedures each and every time, it creates levels of inconsistency," Burand explains. “Levels of consistency are more important in many ways from an E&O perspective." 

But where there is a challenge, there is an opportunity. Technology has become a crucial part of both agency operations and customer experience, with nearly half (47%) of agencies saying they have offered more digital solutions to clients due to the pandemic, according to the 2022 Agency Universe Study. And with advancements in technology, insurance agents can act more efficiently and more consistently, helping solve some of an agency's E&O problems.

However, there are downsides along with the benefits technology brings, and keeping up to date with changes is imperative. In particular, agencies need to be cognizant of the growing cyber risks that come with offering clients ease of access through the use of technology.

While other resources are available, the Big “I" offers its members access to E&O Guardian, the agency E&O risk management resource website designed to provide members key information and tools to mitigate agency E&O. Initially, access to such resources was restricted to members who were policyholders in the Big “I" Professional Liability E&O program through Swiss Re Corporate Solutions. Some of the resources are now open to all members, helping to point agencies in the right direction.

Olivia Overman is IA content editor.