The E&O (errors and omissions) professional liability segment is incredibly unique. With smaller premium volume and costly claims, brokers need to stay agile to maintain profitability.
Jack Mazakian, principal broker, and vice president of Advocis Broker Services, spoke to Insurance Business about the advantages and disadvantages brokers face when it comes to E&O.
“I’ve been involved with this market for 35 years; the advantage is that there is a sophisticated group of underwriters and brokers transacting these products, but the main disadvantage is that there is not enough premium volume to support major swings,” he said.
Manufacturers, lawyers, or doctors all face a unique set of risks, and losses from physical injury and bodily harm can result in lengthy and complex claims.
“A big player in this market was Lloyd’s but over the last few years they pulled out from providing specialty products,” he explained. “The London market has always offered North American customers the ability to build a policy for a specific client’s needs, as opposed to adjusting a shelf product, but that uniqueness has changed. The coverages and prices aren’t the same, causing an exasperation of the hard market.”
Over the past few years, E&O underwriters have been inundated with submissions for things they have never seen before, according to Mazakian.
“This has made the relationships with brokers and underwriters very difficult because the underwriters don’t have enough time in the day to deal with everything. The negotiation aspect has changed to some degree,” he added.
A new wave of E&O submissions has come into the domestic market and Advocis underwriters have voiced that significantly more premium is needed to offset risk.
“Our underwriting profit has reduced over the years as a result of decreased premiums, and we need to recalibrate,” Mazakian emphasised.
In some industries, premiums have increased again causing clients to consider whether they really need E&O insurance in the first place.
“We have had to walk clients through their risks and suggest that they should revisit buying the product when it is less impactful on their balance sheet,” he said.
For doctors, engineers, financial advisors, and planners, they have no choice but to buy E&O coverage because it is a licensing requirement, but brokers are still facing difficulties with pricing and limits.
“Certain groups are being faced with increased premiums and the extreme capabilities of some insurance companies are being curtailed,” Mazakian noted.
Lower limits are causing some issues depending on the profession, and it continues to be a struggle for brokers to communicate how the hard market has impacted E&O programs.
Mazakian added that brokers need to have a comprehensive portfolio to stay agile and active in this space.
“With any kind of business, you want to diversify,” he said. “You want to have a multitude of different revenue sources so you create options for yourself and can sustain business in the future. It is more important to be a dynamic player than having laser focus on one industry.”
