Insurance for Insurance Agencies and Brokers

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Insurance for Insurance Agents & Brokers

Insurance agents and insurance brokers provide a valuable service to their customers. Insurance products cover a wide range of potential risk factors, and insurance brokers and agents step in to help consumers navigate the often complex insurance industry. As insurance agents must be certified, the value they provide customers comes with years of experience and study in different insurance products.

As insurance is a service-based industry, agents and brokers have their own risks related to the services they provide. Brokers not only collect private information from their clients but also handle claims and provide advice to clients. Any of these services can be risky, particularly if some errors occur somewhere in the process of managing client accounts.

Job Functions and Risks for Insurance Agents and Brokers

Insurance brokers and agents perform a number of important duties, many of which are carry the risk of errors. These can include:

  • Advising clients on their correct insurance needs
  • Pairing clients with the appropriate insurer for their situation
  • Collecting premiums
  • Regularly updating client records
  • Handling claims and providing clients with advice
  • Renewing client policies

During the process of performing any of these regular duties, insurance brokers may make mistakes. For example, a broker may suggest a product that he or she thought was well suited for a client, which later turns out to be unnecessary. A broker may also erroneously enter in an incorrect amount for premiums, resulting in a client who unwittingly pays more than was necessary.

It is also possible for client data to get out somehow. Cybersecurity is an important issue for all businesses these days, especially those that house private customer information. Insurance brokers especially keep client data on file that, if stolen, would lead directly to a client’s identity getting stolen. Social security numbers, bank account information, names, and addresses are all commonly collected by insurance brokers and stored on private servers. Should those servers get hacked, that puts the client at risk.

Handling client documents can also come with some risks. Paper documents can get lost. Files can get corrupted. Although these accidents are generally not purposeful, if they do occur, the agency is held liable for lost information, as well as any slowdowns in the processing of claims.

How to Mitigate Risk for Insurance Agents and Brokers

There are several insurance products that can help mitigate risks for brokers. These include, but are not limited to, the following:

  • Errors & Omissions Insurance
  • Cyber Liability Insurance
  • Business Owner’s Policy

Errors & Omissions insurance, in particular, will help mitigate a majority of the common issues that arise for brokerages and brokers. Most claims will result from clients who believe their brokers made errors in judgment when managing the account. E&O insurance will mitigate the cost of those claims by covering legal defense costs and, depending on the result, potential damage restitutions. It is often a good idea to follow industry standards, such as utilizing ACORD documents to help minimize errors and omissions in the documentation process. Nevertheless, accidents can happen even outside of this area.

Cyber Liability Insurance is a highly necessary policy in today’s time, particularly for insurance agents. Identity theft is one of the fastest growing crimes in the United States. Although there are a number of ways this can occur, stolen information from data hacks is one method criminals use to grab bulk data from victims. Many high-profile cases exist, proving that even large technology companies are not immune to this issue. It may also be erroneous to believe that, as a small or midsized business, your brokerage would not be targeted. Indeed, smaller businesses are more likely to have less security, making them easier targets. While there are federal regulations which dictate how much security a business must have when handling private user information, many top-level security systems can be extremely costly for small businesses.

Your personal business property is also something you will want to protect. A Business Owner’s Policy helps protect the property you own, as well as cover your business against any third party claims. This can include computer equipment and office equipment necessary for your business. Should these get lost in an accident, you may experience significant setbacks to your business. Additionally, if you have an office that clients visit, a Business Owner’s Policy will protect you in the case that a client is injured on the premises.

What type of insurance does this industry need?

Policy What is it? Why get it Popularity in your industry Want free quotes?
General Liability
This policy protects your business in case of third party claims, such as bodily injury or property damage. For example, the common "slip-and-fall" claim would be covered by your General Liability policy. General Liability insurance is often considered to be the core coverage, particularly for businesses that regularly physically interact with customers or sell physical goods. In addition, many businesses have a contract, like a loan or a lease, requiring that they have this coverage.

What is it: This policy protects your business in case of third party claims, such as bodily injury or property damage. For example, the common "slip-and-fall" claim would be covered by your General Liability policy.

Why get it: General Liability insurance is often considered to be the core coverage, particularly for businesses that regularly physically interact with customers or sell physical goods. In addition, many businesses have a contract, like a loan or a lease, requiring that they have this coverage.

Professional Liability
This policy, common in the professional services industry, helps to protect your business if a client believes they've suffered a loss due to a mistake or error made in a professional capacity. Your business may have contracts with clients or partners that require Professional Liability coverage, provide a "warranty or guarantee," or have clauses that require you to "indemnify or hold harmless" your clients. If so, Professional Liability coverage is often recommended. This coverage is also commonly recommended for any businesses providing advice related to legal or financial matters.

What is it: This policy, common in the professional services industry, helps to protect your business if a client believes they've suffered a loss due to a mistake or error made in a professional capacity.

Why get it: Your business may have contracts with clients or partners that require Professional Liability coverage, provide a "warranty or guarantee," or have clauses that require you to "indemnify or hold harmless" your clients. If so, Professional Liability coverage is often recommended. This coverage is also commonly recommended for any businesses providing advice related to legal or financial matters.

Commercial Property
This policy protects the business's physical assets and is appropriate whether you own or lease your space. Keep in mind that this policy will only offer protection in the case of covered events. If you need protection for certain scenarios, such as floods or earthquakes, you may need additional coverage. If you have a mortgage or a lease, you may be required to have property insurance. Even if you are not, this is the best way to protect the building you are in and the business property you have in case of a natural disaster or some other accident.

What is it: This policy protects the business's physical assets and is appropriate whether you own or lease your space. Keep in mind that this policy will only offer protection in the case of covered events. If you need protection for certain scenarios, such as floods or earthquakes, you may need additional coverage.

Why get it: If you have a mortgage or a lease, you may be required to have property insurance. Even if you are not, this is the best way to protect the building you are in and the business property you have in case of a natural disaster or some other accident.

Errors & Omissions (E&O)
This policy, common in the professional services industry, helps to protect your business if a client believes they've suffered a loss due to an error or omission on your part. Your business may have contracts with clients or partners that require E&O coverage, provide a "warranty or guarantee," or have clauses that require you to "indemnify or hold harmless" your clients. If so, E&O coverage is often recommended. This coverage is also commonly recommended for any businesses providing advice related to legal or financial matters.

What is it: This policy, common in the professional services industry, helps to protect your business if a client believes they've suffered a loss due to an error or omission on your part.

Why get it: Your business may have contracts with clients or partners that require E&O coverage, provide a "warranty or guarantee," or have clauses that require you to "indemnify or hold harmless" your clients. If so, E&O coverage is often recommended. This coverage is also commonly recommended for any businesses providing advice related to legal or financial matters.

Workers Compensation
Workers Compensation covers an employee's lost wages and the cost of resulting medical treatment if they suffer a work-related injury or disease. It also covers services needed to help the employee recover and return to work. Workers Compensation coverage is mandatory in most states. The number of employees after which it's required differs by state, but you will generally need coverage once you have employees.

What is it: Workers Compensation covers an employee's lost wages and the cost of resulting medical treatment if they suffer a work-related injury or disease. It also covers services needed to help the employee recover and return to work.

Why get it: Workers Compensation coverage is mandatory in most states. The number of employees after which it's required differs by state, but you will generally need coverage once you have employees.

Hired & Non-Owned Auto
This insurance protects the business in the case of any incidents involving a vehicle that has been hired by the company to be used for business-related purposes. It also provides coverage in the case your business uses other vehicles which are not property of the business, such as having delivery drivers use their own vehicles. If your company hires vehicles or allows employees to use their own vehicles for business purposes, you will want to consider this insurance.

What is it: This insurance protects the business in the case of any incidents involving a vehicle that has been hired by the company to be used for business-related purposes. It also provides coverage in the case your business uses other vehicles which are not property of the business, such as having delivery drivers use their own vehicles.

Why get it: If your company hires vehicles or allows employees to use their own vehicles for business purposes, you will want to consider this insurance.

Umbrella Insurance
Umbrella insurance offers excess liability protection in the case that your General Liability, Commercial Auto Liability, and/or Employer's Liability coverage is insufficient. It essentially acts as a "back-up" plan, providing additional financial protection in the case that your business faces a particularly large claim that exceeds a single policy's limits. This policy can be particularly valuable for a business that faces a variety of risks and has multiple liability policies.

What is it: Umbrella insurance offers excess liability protection in the case that your General Liability, Commercial Auto Liability, and/or Employer's Liability coverage is insufficient. It essentially acts as a "back-up" plan, providing additional financial protection in the case that your business faces a particularly large claim that exceeds a single policy's limits.

Why get it: This policy can be particularly valuable for a business that faces a variety of risks and has multiple liability policies.

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