In today’s digital world of constant communication through methods like email, texting and social media, consumers expect 24/7 access to everyone, including their insurance agent. And while this access can increase business for agents, it can also create exposures if agents are not diligent about when and how they respond.

“Agents are struggling with how to communicate with customers so they can still have that relationship and document their conversations with customers,” says Sabrena Sally, senior vice president and head of agent and broker business for Swiss Re Corporate Solutions in the U.S.

Sally says even with the big changes in communication, the main E&O exposures agents face actually haven’t changed that much in the past 20 years. The leading causes of E&O claims still remain the failure to provide coverage that a customer requested or the failure to effectively communicate and explain the coverage being offered.

Technology has also helped agents cut back on E&O problems in many ways, but they still need to have acceptable documentation of the conversations they have with their clients, says Sally.

Another facet of technology that has created E&O exposures for agents is in the storing and proper handling of sensitive client data, and ensuring that clients are adequately protecting their own sensitive information.

Sally says agents have become more educated about these issues in recent years.

“In our discussions with agents, we have seen an increase in awareness of their obligation to protect their customer’s data and with all the industry discussions around customer data they are more aware of the products available to [agents] in the marketplace,” she says.

Swiss Re Corporate Solutions’ insurance agents E&O policy, offered through the Big “I” and underwritten by Westport Insurance Corp., offers a $25,000 per policy period limit for first party personal data breach and a $1 million sublimit for third party personal data breaches on their insurance agents E&O program.

Small Agencies at Risk

The exceptions to this awareness, according to Jay Martin, president and CEO of Professional Underwriting Group (PUG) in DelRay Beach, Fla., seem to be the smaller agencies who do not perceive themselves as having a need for this coverage.

“They are not really concerned about cyber coverage… they don’t perceive it’s a problem based on the size of their business. But I believe that’s going to change because of the issues going on across the board,” he says.

Martin says PUG added the option for cyber coverage to its new admitted insurance agents E&O program that is currently available in 14 states in anticipation of an increase in demand for the coverage and at the request of some clients. The managing general underwriter focuses on the small- to mid-size agency niche, and Martin says as a specialist they closely follow what is going on in the marketplace.

“With new technology and cyber problems we thought this coverage was something we should make available to our customers,” he says.

Christopher Lucas, account manager of agents & brokers E&O for insurance broker Dealey, Renton & Associates in Oakland, Calif., says more E&O carriers are adding coverage via endorsement for nominal additional premiums. The broker is an exclusive marketing agent for the Liberty Mutual Insurance Agents E&O program, which added data compromise coverage to its insurance agents E&O program last year as an endorsement for no additional cost to insureds.

The coverage includes an annual aggregate limit of $100,000 for response expenses and an additional $100,000 annual aggregate limit for defense and liability for suits and damages resulting from a data breach. Response expenses can include costs associated with notifying applicable parties of a breach, credit monitoring services, identity restoration case management services, and help line services.

Investing in Sufficient Coverage

Dealey, Renton & Associates’ Lucas says cyber coverage and privacy liability issues are definitely at play for agents, so they would be wise to invest in sufficient coverage.

“Primary, stand-alone policies should also be considered since broader coverage and higher limits are often available. Of course this comes at an additional cost,” Lucas told Insurance Journal last fall.

David Derigiotis, corporate vice president and director for the Professional Liability Center of Excellence, agrees. He says with so many cyber and privacy liability risks right now, agents should really look into having more of a robust policy.

“E&O policies by themselves are not designed to respond to these exposures. A lot of times the endorsement just doesn’t give enough across the board,” he says.

“There’s so much competition in the marketplace and it’s such a competitive product right now that anybody should be able to obtain an affordable product within the insurance agency space,” Derigiotis says.

But coverage isn’t the only way to mitigate E&O exposures for insurance agents. PUG offers newsletters and risk management education to its clients.

Swiss Re Corporate Solutions and the Big “I” provide an “E&O Happens” website with information around the topic of preventing and mitigating E&O situations, including those that deal with technology issues.

Sally says the cyber liability space as a whole is a challenge for agents because there is no standardization with the coverage.

Agents also have to understand the complexity of the coverage, differences in terms and conditions from one carrier to another and be able to assist customers that use all different types of technology. Staying educated and informed will help agents assess and tackle these challenges.

“Agents need to keep abreast of what their customer is doing and have timely discussions so they are on the same page as the customer – what are their exposures and is the agent addressing what they need for insurance?” she says.