A Look at the Biggest Risks Faced by Insurance Agents

As an insurance agent, claims adjuster, actuary, or broker, you already know about risks. It's the name of the game in your line of work, even if you just handle the aftermath of risks becoming realities. But what you may not have thought about is how big-picture probabilities can affect your business every day. Here are some eye-opening stats about the things most likely to harm an independent risk management professional, along with a helpful guide to choosing the coverage best suited to managing those risks.

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Find Your Flow: Insurance Agents and Stock Brokers Coverage Flowchart

Insurance Agents and Stock Brokers Coverage Infographic

Even if you already know how to identify and handle someone else's exposures, it can be harder to assess your business's situation when you're in the middle of it. That's why even seasoned pros can benefit from a little help. So if you want some perspective on the risks your agency may come up against, check out this easy-to-use coverage flowchart. Though your insurance agent will assess your risk profile in full, this chart gives you a general idea about the policies you may need.

Insurance Agents & Lawsuits

Insurance Agents & Lawsuits

More than 14% of insurance agents are sued.
Frivolous lawsuits can cost more than 14% of a business's revenue.

One out of every seven insurance agents is sued. That means that if you play on an insurance agent softball team, the odds are that at least one of your teammates will face a lawsuit! Okay, that's a silly way to think about it. But these numbers are staggering. Why are lawsuits so common? Insurance agents are often named in lawsuits when a claimant has a problem with the insurer's coverage. Even if you don't make a mistake, you can be dragged into a dispute between a customer and an insurer.

If a small business is sued without justification, the case will still probably cost between $2,000 and $5,000. Considering that business owners with minimal experience can expect to earn about $34,392 in a year, the cost of unfounded lawsuits is considerable. Even if you're completely innocent and the other party is suing you without a shred of evidence, you'll still be on the hook for a substantial legal bill so your lawyer can prove the case is ridiculous. Of course, liability insurance pays for these legal costs when you have the appropriate policy in place.

What Can Claimants Sue You For?

What Can Claimants Sue You For?

of insurance agent E&O claims are for failure to procure coverage.
of claims are for failure to explain policy terms.
of claims are for failure to identify risk exposure.
of claims are for failure to recommend a particular coverage.

What can claimants sue you for? All sorts of issues, but the most common E&O claim for insurance agents is for failing to procure coverage. Nearly one-fourth of all Errors & Omissions lawsuits are over this. Some other common reasons an insured will sue their agent include…

  • Failure to explain policy terms (6 percent).
  • Failure to identify risk exposure (5 percent).
  • Failure to recommend a particular coverage (5 percent).

When combined, these four claims account for 40 percent of your insurance agent E&O liability.

Grab-n-Go Information

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