Where once broker liability claims were largely limited to commercial lines, within the past decade, the industry has seen about half of all claims now directed at personal lines brokers.
“In Ontario, I can tell you offhand that automobile is the leader, followed by homeowners and things like commercial property and general liability,” said Hugh Fardy, senior vice president, The CG&B Group and administrator for the IBAO and IBAN’s Professional Liability Program.
This trend is becoming more prevalent across the country, which means that brokers in every region are increasingly vulnerable to E&O exposures.
“Even nationally, after taking into consideration that some provinces offer automobile insurance through the government, automobiles and homeowners are the leaders, with homeowners catching up on a rapid basis,” he said.
One of the areas where this weakness is most apparent is in brokers’ lack of meaningful communication with their clients when assessing their individual needs.
“Often, I think this results from a lack of us asking as many questions as we used to ask,” he said. “That leads to another exposure, which is that we’re not making the right kind of coverage recommendations since we don’t have a good understanding of their risk.”
As a result, Fardy not only recommends that brokers explore new and different means of communicating with policyholders during times of policy renewal, but also that they “expand the number of questions we ask” once that contact is made.
“We need to update our questions. Some of the things we ask on homeowners’ insurance we’ve been asking for 25 years, even though houses aren’t the same as they were 25 years ago,” he said.
One of the best suggestions Fardy makes is to steer clear of questions that yield “yes” and “no” answers. If a broker asks whether a client has a pool, for example, homeowners may reply “no” even if they have a hot tub or something comparable.
This is particularly important for Ontario auto insurance brokers, following the government-mandated changes in accident benefits coverage. Even though that legislation was passed five years ago, brokers are still responsible for explaining the intricacies of it to clients today.
“Sadly, many brokers thought once we got through the first year or two of dealing with changes, it was all over and done with. But the coverage that people buy changes based on their life cycle, and you can’t be depending on questions from three or four years ago to be appropriate for insurance coverage now,” he said.
“We need to be better at staying in touch with people at a regular basis.”
