Everyone wants insurance to be easy. Clients want to purchase policies quickly and get as much out of the deal as they possibly can. Insurance carriers have tapped into this trend by offering more and more bundle packages with add-on endorsements and add-on riders.
The incentive for brokers is simple – adding endorsements is an up-sell. It brings in higher premiums and more business. But are brokers leaving themselves vulnerable to litigation by embracing the bundle?
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Bundling coverages together has an advantage for insureds in that they can purchase a set of different coverages all in one go. This can potentially be good for business, but it does “create new issues” for the brokers in terms of what they should offer and what they’re qualified to recommend, according to Michelle Arbitrio, partner and chair of Wilson Elser’s national Specialty Professional Risks practice.
“Carriers are increasingly offering bundle packages made up of different lines of coverage on the same policies - and this is making the insurance market more complex for insurance agents and brokers to navigate,” Arbitrio told Insurance Business. “Brokers now have the option to offer or recommend these bundles and some might feel compelled to do so because the option to sell more coverage is there. If they choose to avail themselves of that option, they need to consider the potential consequences.
“The first concern is that the broker is selling an endorsement without the expertise or the qualifications to do so. It’s not so much of a problem among bigger companies because they have the capacity to bring in specialists and consult with internal experts before recommending add-ons. But some smaller companies don’t always have the relevant expertise to tap into and so the brokers are left on their own.”
This culture of coverage bundling sets up potential “landmines for brokers” who might leave themselves open to errors and omissions or professional liability claims if they don’t perform appropriate due diligence, according to Arbitrio.
A second area of concern with regards to brokers, bundle packages, and professional liability, is around the broker who had the option to offer coverage endorsements but chose not to, leaving the broker potentially open to litigation if an issue occurs as a result of that decision.
“Right now, it’s a hypothetical scenario because we haven’t really started to see that type of lawsuit coming, but the way that policies are changing and the way carriers are introducing more endorsements, it’s an issue that could be on the horizon,” said Arbitrio. “When it comes to litigation, it’s very specific to the facts of each individual case. The courts evaluate liability on a case-by-case basis. Every broker brings different qualities and issues to the table, making professional liability really case sensitive.”
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