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.