Doing Business Online Demands the Latest E&O Protection

If you’re a life insurance agent who uses Internet quoting apps to attract buyers, you’re at risk of suffering a data breach. But even if you just use the Internet to publish your website or to promote yourself using social media, you’re equally at risk. The problem is, agents who store client information on local databases and then share that information via an office network are in danger of being hacked if their computers are connected to the Internet. Welcome to the brave new world of online life insurance, a world in which just turning on your computer subjects you to potentially devastating financial losses.

What are some of the online risks you face? Allow us to list five of the top ones:

Threat #1: The individual hacker. Your Internet connection theoretically makes the entire world your life insurance sales territory. Unfortunately, though, this also allows lone-wolf hackers to breach any of your wired or wireless computers in order to penetrate your systems and steal your data. If your computers, network, and applications are improperly configured, hackers can grab and sell your clients’ information before you even realize what’s happened. While you’re still scratching your head, the hacker will have posted this valuable data for sale on shadowy online marketplaces in distant countries, far from the reach of U.S. law enforcement.

Threat #2. Your own employees. Most life insurance agents assume foreign hackers across the globe are targeting their data. Few think about the risks people near to them pose—for example, employees at a local coffee shop or restaurant or their own employees. Case in point: a Verizon survey found that 50 percent of all incidents involved people who quit their jobs and then stole their company’s financial data or customer information. Complicating matters is the fact that life insurance agents often hire staff without sufficient pre-employment screening.

Threat #3. Your mobile devices. There are multiple risks inherent in the use of mobile devices within a life insurance sales operation. First, there’s the risk of allowing your employees to use their own smart phones, laptops, and tablets to access your network. Unless you thoroughly vet those devices, you won’t know if hackers have compromised them, leaving you at risk of data theft. And since you and other agents on your team are likely highly mobile, spending large parts of each day visiting with prospects and clients outside the office, you are at risk of getting hacked each time you access your office customer relationship management (CRM) database from an outside, unsecured wireless network.

• Threat #4. Your business vendors. As a life insurance agent or agency owner, you frequently work with service providers who support your business operations. These might be Internet lead providers, paramedical services and the like. Unless you thoroughly review each of these vendor’s cybersecurity policies, you won’t know whether doing business with them subjects you and your customers to heightened risks.

Threat #5. Your personal providers. In addition to firms that support your life insurance business, you also do business with a myriad of other firms personally, including credit bureaus, large online merchants, credit card firms, life/health insurance companies, and even the Internal Revenue Service. Each of these collects and stores a huge amount of data about you, which can be stolen and then used to penetrate your firm’s network and databases.

In short, using the Internet to become a more effective life insurance marketer brings huge advantages in terms of expanding your market reach. But it also brings the downside of subjecting you to heightened cyberrisks. We say this not to frighten you, but to motivate you to focus more intently on cybersecurity, especially on conducting annual risk assessments, updating all your application patches, training staff on secure practices, and testing your firm’s ability to detect and respond to a cyberbreach.

As daunting as all that sounds, there’s immediate help at hand—in your E&O insurance policy. That’s because modern E&O insurance policies have been updated not only to protect you against the traditional risks of making a mistake or forgetting to do something important, but also to protect you against some cyberrisks. For example, life agent E&O from EOforLess includes a client network damage and privacy claim endorsement. What does this mean? It means you will have coverage against monetary claims resulting from an alleged electronic infection that damages a customer’s network. The damage must be the result of your rendering of covered professional services. This means, for example, that a client who picks up a computer virus and sustains financial harm as a result of accessing your computer network can be indemnified through your policy (subject to the limits and definitions in your contract and network endorsement).

What’s more, there may even be coverage for monetary claims resulting from an error or omission that damages a customer’s privacy or sends his or her personal data into the world where it can be sold to online criminals. Again, this customer damage must have resulted from you engaging in your professional duties.

Now, this endorsement is no substitute for a comprehensive cyberinsurance policy. But it does provide some protection against cyberrisks, subject to the definitions in your network risk and privacy claim endorsement. Check your E&O policy for full details.

And don’t forget, your E&O insurance policy also provides a financial backstop for traditional offline errors and omissions—for not providing needed coverage, for recommending the wrong insurance, or for incorrectly executing a customer-requested transaction, among many other potential errors or omissions. As long as you keep your E&O insurance policy in force, it will pay for your attorney fees, court costs, and client settlements should you lose your case (subject to your policy limits and exclusions). Without such protection, you will be exposed to potentially huge legal judgments that could kill your business and harm your personal finances.

Traditional E&O coverage, along with the network risk and privacy claim endorsement, will go a long way toward giving you the peace of mind you need to focus on growing your life insurance business in these challenging times. Why worry needlessly about mounting cyberrisks when E&O insurance has your back?

Many Americans dream of being in business for themselves. In financial services, tens of thousands of life insurance agents, financial advisors and planners, and securities brokers decide to hang their shingles each year. They’re all in search of autonomy, financial growth, and the satisfaction of doing good work for their clients.

If this applies to you, you probably remember how exciting it was when you pulled the trigger and launched your business . . . getting new stationery and cards, equipping your new office, going out on your first sales meeting, and closing your first sale. The best part? Getting your first commission check!

However, with all that excitement, you may not have considered some of the downsides of launching your new venture—the expenses required to set up your firm, the long hours needed to find prospects and close sales, the intense study required to master your product line, the effort to comply with state and federal rules and regulations.

One of the biggest downsides of all: the unique E&O risks that start-up businesses face. Which makes it crucial that financial advisors learn about—and buy—errors and omissions insurance.

Three Major E&O Start-Up Risks

So what risks are we talking about? There are three major ones.

First, new financial professionals typically enter the business with a knowledge deficit. If they’re coming from a totally unrelated field such as teaching or from a corporate job, they’re starting from ground zero in terms of knowledge. They don’t know how to initially approach clients. They lack knowledge about how to best assess financial needs. They’re still in the process of learning about the technical workings of life insurance, annuities, and investment products. Most importantly, they’re not fully aware of how state and federal regulations constrain their actions—and what the costs are for violating those rules.

If the person starting out has some related financial experience—say, as an accountant or as a customer-service person in a life insurance company—the learning curve might not be as steep as if they were totally green. But the point remains that the amount of knowledge needed to break into and then ultimately succeed as a financial sales professional is immense. Which means any lack of knowledge increases the odds of making a mistake . . . and getting sued. Errors and omissions insurance is an essential backstop for start-up professionals who have good intentions, but may lack the knowledge and experience to avoid costly mistakes.

Second, start-up agents and advisors typically start out with a low base income. They need to close a lot of cases, fast, in order to generate an income they can live on. Plus, since they’re typically early in their careers and may have young families, their cash needs might be quite high, but their net worth low. With the average cost of a life insurance-related errors and omissions claim being roughly $40,000, according to a major errors and omissions underwriter, the financial impact of losing a client lawsuit can be devastating. It’s the kind of blow a start-up professional might never recover from and for which the only remedy is bankruptcy. Here again, having a high-quality errors and omissions policy in force can spell the difference between weathering a business storm and getting swept away by it.

Third, new financial advisors typically have, well, a new client base. That means their customers won’t know them very well and may not have lived through the market ups and downs with them. This means advisors may not yet have established a reservoir of client trust and good will. If they make a mistake that harms their clients financially, their customers may not be willing to give them the benefit of the doubt. Their first impulse might be to sue the person rather than work things out. In this case, being insured with errors and omissions insurance is yet another financial safety net for a start-up professional.

In short, launching a new business can be difficult and risky enough without also being unprotected against client lawsuits. Most new agents will never have a problem client and will never get sued. But a small minority will, and the results can be incapacitating from a financial point of view. Are you willing to “bet the ranch” that your new business will never face such a client? If not, now is the time to consider buying high-quality, affordable errors and omissions insurance, designed especially for your business, from the pioneer in online E&O, EOforLess.

There are two reasons life agents should carry E&O insurance. The first has to do with them. The second has to do with their clients. Let’s take a closer look at each perspective.

Life Agents Buy E&O Insurance for Themselves

The reason life agents buy E&O for themselves is because what they do for a living is inherently risky. Think about it. Every day you help clients deal with complex financial matters involving potentially tens of thousands or even hundreds of thousands of dollars. In fact, when an affluent client buys life insurance to fund an estate transfer, literally millions of dollars can be on the line. Making a mistake or forgetting to do something that botches such a transaction can leave you susceptible to potentially career-ending lawsuits.

Another reason life agents need E&O for themselves is because they often work with older clients who may have cognitive impairments. Such clients may authorize a purchase that their children find unsuitable. When this happens, the clients’ beneficiaries, who often stand to inherit large estates, are not shy about making their views known. Worse, if they think the agent took advantage of their ailing parent, they will not hesitate to file regulator complaints or even sue a life agents.

And let’s not forget today’s unsettled regulatory environment, especially around the U.S. Department of Labor’s Fiduciary Rule. Although the rule went partially into effect on June 9, 2017, it might still be revised, watered down, or cancelled prior to its full effective date on January 1, 2018. Until then, life agents who sell retirement products will be expected to serve a client’s best interests. And if they don’t, they run the risk of clients and their attorneys suing them for breach of fiduciary duty.

Finally, let’s not forget that many life agents work in home-based offices, either for themselves or for a life insurance agency. In either case, they may lack dedicated administrative support. This means they have to handle all their own paperwork, including the filling out and filing of life insurance applications. Because sales, not paperwork, is their forte, life agents who work alone may make mistakes that create E&O liability risks

Put the above factors together and what do you have? A compelling reason for you to buy E&O insurance to mitigate your business risks. But equally important is the need to buy E&O insurance for your clients’ sake.

Life Agents Buy E&O Insurance for Their Clients

Although it’s human nature to assume one will never make a mistake, the fact of the matter is mistakes happen, even to the most experienced life agents. And if the worst comes to pass, ethical life agents realize the importance of both protecting their businesses against legal claims and making their clients whole financially. They are rewarded for this because people would rather do business with agents who take responsibility for their mistakes rather than those who shirk responsibility in order to save money.

In short, life agents who wish to build and maintain a sustainable practice know they must always be selfish and selfless when it comes to E&O insurance. They must protect their own financial interests so they can continue to work in their business, while at the same time being responsible for any harm they cause to their clients. The beauty of E&O insurance is that it allows life agents to cover both bases for a reasonable cost, for as long as they keep their E&O policy in force.

In today’s busy, stressful world, any product that helps the seller and the served as powerfully as E&O insurance does is a product worth having, especially if it builds trust as well.

So here’s the bottom line. Are you in the market to buy E&O insurance for the first time or looking for an alternative to your current E&O coverage? Then consider the benefits of buying from EOforLess, an online source of affordable and convenient E&O since 2008. EOforLess specializes in meeting the needs of life agents with quality protection at a low cost, making it a huge win-win for both them and the clients who trust them.

There are six things to look for when purchasing E&O insurance. The first two things—the insuring clause (i.e., whom the policy protects and when will it provide benefits) and the exclusions (conditions under which benefits aren’t available) are integral to the policy contract. In other words, in return for paying a premium to—and entering into an agreement with—an insurer, the contract will provide benefits as long as certain conditions are met.

As you buy E&O insurance, your first challenge is to make sure the policy works for you at the contract level. Are the benefits on offer appropriate for your financial needs and license type and are the exclusions reasonable? You should immediately reject any E&O insurance policy that misses the mark on those two points. There are many alternatives on the market today, so why buy E&O insurance that’s unlikely to meet your needs when you need it most?

Don’t Forget These Four Value-Added Features

But once you’re satisfied the product will perform well at its core, it’s time to look at four other features that distinguish E&O products from each other. Let’s consider each in turn:

  1. Price: You obviously don’t want to pay more for your E&O insurance than necessary. You also don’t want to pay too little. Here’s what we mean. If your policy is too expensive, it will be a hardship to keep in force. You’ll likely let it lapse, which will create a coverage gap that could leave you uninsured in the future even if you get a new policy. So buying expensive E&O insurance is obviously not in your best financial interest. But why is paying too little a problem? Because insurers and their marketing partners may have designed a product that isn’t actually insurance. Instead, they may be promoting a risk-sharing pool that is not statutorily required to pay claims. Thus, if the pool runs out of money just as you’re getting sued and ready to file a claim, you may be out of luck if you lose in court.
  2. Top Rated Insurer: When you buy E&O insurance—or any type of insurance for that matter—you want your insurer to be there when you need help. Problem is, some companies may have set aside fewer financial assets in reserve for future claim contingencies. This means they may be financially stressed if future claims are greater than anticipated. Or if the gap between claims and underlying assets is great enough, they may become insolvent. Not good if you’re counting on the insurer to pay for your E&O judgment or settlement. For this reason, four ratings firms (A.M. Best, Moody’s, Fitch, and Standard & Poor’s evaluate insurance company finances and assign letter grades to reflect claims-paying ability. Each rating organization uses a different scale, so an A from one may not be comparable to an A from the others. However, just make sure your E&O insurer has ratings either at the very top or close to the top of each rating firm’s scale. This means it will likely still be in business if and when you need to file an E&O claim.
  3. Fast Application: Once you’ve determined the E&O policy you’re considering will meet your needs, that you can afford it, and that the insurer selling it is financially strong, it’s time to consider how easy it is to purchase the policy. In the old days—say five or ten years ago—most financial professionals bought their E&O insurance through specialized insurance brokers. This required an initial agent discussion, the preparation of an insurer quote, and then the completion of a lengthy E&O insurance application and underwriting process. As you can imagine, this process could take weeks or months, leaving insurance agents unprotected against client lawsuits in the interim. Today, thanks to Internet technology, increasing numbers of financial professionals buy their E&O insurance from online innovators that have re-engineered the entire buying process, making it much easier to select an appropriate product, complete an application, and print out a policy in minutes rather than weeks or months.
  4. Free Ethics/Compliance/Continuing-Education (CE) Courses: Finally, look for your E&O insurer to not only provide a financial backstop in the event you get sued, but also to help you avoid disputes in the first place. Make sure it publishes useful ethical guidance, which helps you do business the right way, and informative compliance content, which helps you avoid regulatory sanctions. Also look for free CE courses in order to help you fulfill state and professional-group education requirements.

When you find an E&O firm that ticks all of the above boxes, your due diligence will be over. The good news? EOforLess is just such a firm. As a leader in E&O insurance for financial professionals since 2008, EOforLess offers:

  1. High quality, affordable E&O insurance customized for various insurance, investment, and real estate license types.
  2. Affordable protection that even new agents, brokers, and advisors can afford, starting at $489 per year for life & health agents.
  3. Highly rated insurance underwriters, including CNA, Everest National, and Liberty International.
  4. A customer friendly website that speeds you through the process of selecting a policy and then applying and paying for it . . .all in minutes or less.
  5. A content-rich website that provides ethics and compliance guidance to help you avoid customer complaints and lawsuits, along with access to unlimited online CE courses to facilitate your license or designation educational compliance.

In short, as you enter the E&O marketplace, consider all the factors that go into high-quality E&O protection—from contract design and price to insurer ratings, ease of shopping, and educational support. As you consider what EOforLess brings to the table, we hope you’ll agree our total package represents a super value in today’s crowded marketplace.