BOOST YOUR COMMITMENT TO E&O PREVENTION!
by Curt Pearsall
How do hard market conditions affect your E&O strategies? This document by Curt Pearsall tells you why you should examine your loss prevention methods, particularly in light of recent events.
The market had begun to harden before September 11th in many parts of the nation. Prices were rising and carriers were non-renewing unprofitable business and/or adding new exclusions. Mold, a risk that had barely found its way into insurance policies, was becoming a significant issue. Carriers were uncertain about their exposures to e-commerce and cybercrime.
Terror Tuesday shocked the industry out of its complacent belief that the future would resemble the past. Reinsurers abruptly redefined their worst-case catastrophe scenarios. In my 27 years, I can’t remember a market as hard as today. To survive in this stressful environment, agents will need to strengthen their commitment to E&O loss prevention. Here’s why:
- History has shown that the harder the market, the greater the exposure of agents to E&O claims. Market restrictions are leading more and more agents to seek new homes for non-renewed business. When you move an account from one carrier to another, you or your staff should do a comparison to ensure that the new program protects your customer at least as well as their previous coverage — or if it doesn’t, inform them of the difference. Otherwise, you’re asking for trouble.
- After September 11th, many carriers suddenly realized that their underwriting had been too slack and that they had higher aggregate exposures than they could afford. This single event generated claims for Personal Auto, General Liability, Property, Workers Compensation, Inland Marine, Life insurance — the list goes on and on. The result: company underwriters are playing hardball, asking such questions as how many employees work in a common location or the height of a building. As the market continues to tighten and you find it harder to place certain risks, you might well turn toward the E&SL marketplace, whose freedom of forms and lack of guaranty funds carry their own E&O exposures. What’s more, E&SL markets are tightening up on coverages, especially in Property lines.
- Finally, more and more carriers are playing hardball with their agents in strengthening agency-company agreements and cracking down on violators.
The combination of new exclusions (such as mold, terrorism, and cyber-risks) with a hardening market, and companies’ tough-nosed attitudes to agency agreements make it more vital than ever to strengthen your commitment to E&O loss prevention.
This article originally appeared in the Utica National Insurance Co. E&O Bulletin and is reproduced by permission. Curtis Pearsall, CPCU, AU, ARM, AIAF is vice president, E&O, Utica National Insurance Group. He can be reached at Utica National Insurance Group, P.O. Box 530, Utica, NY 13503, (800) 274-1914, fax (315) 734-2807, or e-mail [email protected].