Real estate professionals face a myriad of exposures in their daily operations. These risks are often centered around legal claims filed by disgruntled property buyers, sellers and renters. To protect themselves against the risks associated with the real estate transaction, real estate professionals (including agents, brokers, mortgage brokers, leasing agents, property managers, appraisers, and more) can use errors and omissions (E&O) insurance.
Real estate E&O insurance serves as a form of professional liability coverage and is designed to protect real estate professionals from a wide range of risks, including breach of contract, breach of duty, misrepresentation of the condition or value of a property, allegations of fraud, property damage and/or bodily injury, and more. Typically, the policy will cover the fees and damages associated with legal claims, reducing out-of-pocket expenses faced by the insured.
The real estate E&O insurance marketplace is “cyclical,” according to Zach Vollmer, real estate program manager at Victor. When the real estate market is growing, the frequency of E&O claims is generally predictable, with increases in claims closely mirroring increases in overall transactions. However, when the housing market is volatile and home sales and valuations decrease, there’s often a sharp uptick in claims driven by unhappy individuals in the home-buying process.
Over the past year, the real estate E&O insurance marketplace has been “extremely tumultuous,” despite positive trends in the US housing market. Vollmer commented: “The number of available options for realtors and real estate professionals to purchase quality E&O coverage has decreased significantly. We've seen multiple markets exit the space altogether, MGA’s forced to replace capacity providers, general reductions in risk appetite, and we've seen some markets look to take significant increases in rate.
“That's due to a variety of factors. Some of it was driven by losses, and from my perspective, segments of the real estate E&O space had been underpriced for some period of time. There are also capacity issues that are not necessarily related to real estate E&O, which have caused markets to deploy their capacity elsewhere. For example, issues in the property and casualty (P&C) market from recent property losses and other losses within certain financial lines caused markets to move capacity away from the small commercial space and into other segments of their business.”
While the real estate E&O market continues to be in flux, Victor is the essence of consistency and stability. Victor’s real estate E&O insurance program has been in place for over 38 years with the same carrier partner. Vollmer attributes the program’s longevity to appropriate risk pricing and selection, having expert staff (the average tenure of an underwriter in the real estate program at Victor is 22 years), and offering a value proposition that is centered around risk management and loss control through education and partnership. Additionally, Victor and the National Association of REALTORS® have partnered under the REALTOR Benefits® Program to provide a first-class errors and omissions insurance program to REALTOR® members.
“We also do everything that we can to make it easy for insurance agents and brokers to work with us,” Vollmer added. Victor’s real estate E&O program is available for quote, bind and issue online through Victor’s V2 platform, a business portal that gives agents and brokers the benefits of instant quotes and application management through simplified and streamlined, technology-driven processes.
“That’s something you don’t typically see for professional liability lines of business,” said Vollmer, who added: “It really sets Victor apart. Not only can we provide a program that's the oldest in space, which I would describe as the market standard, but we're also the easiest to work with because of the technology that we put out for agents to utilize.”
Making life easy for retail agents and brokers is important, especially when the market is in a “tumultuous” state. Vollmer noted: “Insurance brokers should look at the longevity of a program and how long it has been partnered with a carrier, because that's an indication of the strength of the program. While there still are programs out there to secure real estate E&O insurance, when agents or brokers have to remarket policies because the carrier has exited the business, that's typically when they run into greater E&O risk themselves. Agents and brokers should ensure they are picking an expert provider and one, like Victor, that will continue to be a presence in the space for an extended period of time.”
To learn more about the Victor real estate E&O insurance program, visit: https://www.victorinsuranceus.com/realestate