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The Age of Internet E&O Insurance Shopping

Today, consumers expect to be able to buy everything and anything on the Web: books, music, movies, clothes, shoes, and even cars. But it wasn’t too long ago that buying a product online was either impossible or clunky. That’s not surprising, since selling on the Web—also known as e-commerce—only began in 1994. That’s when several college grads set up a firm called NetMarket in Nashua, New Hampshire. Their first sale—on August 11, 1994—was for Sting’s music CD “Ten Summoner’s Tales.” The price was $12.48, plus shipping, and data encryption protected the buyer’s personal data.

And so it began. Soon, Amazon set up a website to sell books. Then as more consumers became comfortable using their credit cards online, sites that sold flowers, chocolates, wine, and many other products became ubiquitous. Within a few short years, Amazon expanded to become the Web’s first “superstore,” and online commerce became the preferred method of buying just about anything.

But one industry lagged behind: insurance. True to their conservative roots, insurance companies were uncomfortable selling on the Internet. They wanted to protect not only their current business models, but also their policyholders against unknown threats.  Web-enabled commerce was simply too new, too risky, and too faddish for them to jump in boldly. They would let other industries go first to make sure the “waters” were safe.

Years passed. Finally, in the first decade of the new millennium, insurers became more comfortable with the technology. What’s more, with buyer preferences changing, insurers were forced to quicken their pace of innovation, launching websites to help consumers shop for life, auto, and home insurance . . . the most common forms of insurance sold at the time.

Despite these initial efforts, insurance shopping sites often failed to provide a seamless customer experience. Insurers used their websites to collect consumer data for quoting, but still directed buyers to a live insurance agent to close the deal. That’s where Internet insurance sales remained until relatively recently.

Today, a growing number of insurers have begun to actually issue insurance online, not just provide quotes and referrals to agents. But this convenience is available mainly for simple types of coverage that require limited or no underwriting—sadly, not for E&O insurance for life agents.

The Click & Bind E&O Revolution

If insurers lagged behind other online innovators, E & O insurers literally brought up the rear. Here’s why. Professional liability insurance is a complicated coverage.  There are different policy designs for various business types. And potentially large settlements meant E&O insurers resisted simplified underwriting. Plus, they continued to work through traditional brokers who used complicated paper applications, sent the forms to several insurance companies, and waited days or weeks to receive quotes. Life insurance agents had to run a gauntlet to buy E&O insurance. Once the proposals arrived, the financial professional would compare them and select and pay for the best one.  Then came more waiting before the new policy arrived.

It took an entrepreneurial and nimble innovator to introduce a new Web-powered model for E&O insurance for life agents. In 2008, the National Ethics Association, an association of ethics-minded financial professionals, launched EOforLess.com, a shopping portal that allowed life and health insurance agents to purchase professional liability insurance in 10 minutes or less. We coined the phrase “click & bind insurance” to show just how easy it is to find and buy the E&O protection you need on our site.

Thanks to our platform’s user-friendly design, you can select an appropriate form of E & O insurance (now for multiple license types, not just for life/health), set up an account, complete an application, pay for the coverage, and then print out proof of insurance—within minutes. Consider the advantages such speed provides:

  • If you encounter a sales opportunity for which you need access to a specialized insurance product and carrier and if that insurer has specific E&O requirements, you can quickly find coverage and print out an insurance certificate in minutes.
  • If you’re new to the industry and don’t have the time to vet multiple E&O insurance brokers to find one you can trust, you can use EOforLess.com to do your shopping for you . . . again in just a few minutes.
  • If you have E & O insurance, but you’re unhappy with your current coverage or premium, you can find a replacement in short order, potentially saving money and upgrading your protection with little time or effort.
  • If you lapsed your E&O insurance by mistake, you can quickly get re-covered to minimize your liability using our easy buying process.

Why hassle with comparing brokers and policies the old fashioned way, when you can do it in minutes using a convenient site such as EOforLess.com

In short, the click & bind revolution has transformed the insurance industry, especially the complex E&O segment. Using the latest in user-experience design and efficient and secure e-commerce technology, EOforLess provides the utmost in choice, convenience, and security to any financial professional needing E&O insurance fast.

So the next time you buy, well, anything from Amazon, remember that the same level of convenience and safety is also available from EOforLess.com, the industry’s click & bind E&O insurance pioneer. Come visit us soon!

Don’t Let a Large E&O Judgment Kill Your Business

Most small financial-services businesses operate on slim margins. They lack a surplus of commissions, fees, and other income over their monthly expenses. What’s more, firms often have limited assets to convert into cash when emergencies arise.

Since they essentially operate on a high wire with no financial safety net, they are vulnerable to unexpected events, including demands from aggrieved clients. Such events, called errors-and-omissions claims, occur when a customer believes you either made a professional mistake or failed to deliver a promised service, which cost them money. The result of losing such a claim—a large settlement or legal judgment—can be severe.

Case in point: According to the National Center for State Courts, the average small-business E&O insurance judgment totals over $140,000, not including legal fees. If your company faced expenses this large, what would you do?

  • First, you could try to tap your cash accounts. But how many firms have that much ready cash or available cash equivalents?
  • Second, you could attempt to convert tangible assets into cash. But most financial-services practices typically don’t have assets other than their good name and future anticipated revenue in the form of commissions and fees. Quickly transforming these assets into ready cash can be difficult. If they own their building or the land it sits on, they could put those assets up for sale. But that could take weeks or even months, and might generate lower proceeds than expected based on current market conditions.

Bottom line, if you don’t have the cash and can’t liquidate assets, how would you pay for a large E&O settlement or legal judgment? You can’t! You’d declare bankruptcy—and try to get on with your life.

But even under that scenario, an E&O dispute can haunt you for decades. You might find it difficult to borrow money to restart your business. Or you might have trouble finding a job in a new industry.

Let’s now paint a happier scenario. Imagine you have an E&O insurance policy to pay for your attorney and settlement/judgment costs. What a difference! Now you can avoid bankruptcy and continue in your business as before. Sure, you might carry scars from the experience. But you’d have avoided bankruptcy. Which option is more appealing? The latter, of course. That’s because E&O insurance can spell the difference between bankruptcy and longevity.

A Full Policy of E&O Insurance Is Your Best Defense

A full policy of E&O insurance is your best defense against the scenario we just described.

It protects your financial-services business in three ways.

  • First, it insulates you against the financial impact of making a professional mistake.
  • Second, it protects you in the event you fail to deliver on your contracted promises.
  • Third, it covers you should you fail to perform your duties up to generally accepted industry standards.

Should any of the above events occur, your E&O insurance policy will kick in, paying for your attorney fees, court costs, and settlements or judgments, up to your policy limit.

And don’t forget. Typical E&O insurance policies include duty-to-defend language. This means the insurance company is on the hook not only for paying your legal fees, but also for providing you with an attorney. Not having to vet and retain your own lawyer is a huge plus when you’re in the middle of a nasty client fight.

E&O Insurance Can Keep Your Business Out of Court

Most people focus on the ability of E&O insurance policies to protect their assets should they lose in court. But an equally powerful benefit is their ability to provide cash to settle client disputes out of court.

With E&O insurance coverage, your insurer will provide you with an attorney to immediately manage communications with the plaintiff and that person’s lawyer. The goal: to reach a mutually agreeable settlement, which will prevent the delays, expense, and headaches of taking a case to court. It also allows a trained legal professional to handle negotiations rather than you, who might be unschooled in legal matters. Having your attorney negotiate for you will help both parties to agree on an optimal settlement amount—not too large, but not too little.

Now, consider what might happen if you didn’t have E&O insurance. The plaintiff might have been willing to accept a lower amount. But since you lacked the money to settle, the dispute might end up in court anyway, costing you more money in the long run—money you didn’t have.

Since E&O insurance can keep your business out of court, doesn’t it make sense to protect your future now with an affordable, comprehensive E&O policy? And if you’re looking to shop, apply, and pay for your E&O insurance in five minutes online, then consider visiting EOforLess.com today to take advantage of our user-friendly shopping portal. It’s easier and faster than buying from a traditional E&O insurance broker. Good luck!

 

The risks of errors & omissions are real. Despite the human tendency of assuming that bad things always happen to other people, the chance of an unhappy client suing you is high. And the fallout of losing in court can range from paying a minor five-figure judgment to cleaning out your life’s savings. The point is this:  if you’re serious about building a business with long-term value, don’t let errors & omissions bankrupt you.

The solution isn’t hard to see: buy a high quality, affordable E&O insurance policy to transfer your risk to an insurance company. Doing this also converts a potentially large and unknown cost to one that is predictable and manageable: monthly, quarterly, or annual E&O insurance premiums.

Now, as with all forms of insurance, the devil is in the details. Spend the time to consider your options. Look at various insurance company offerings, focusing on their insuring clauses and exclusion lists. You also want to select a policy that works for your type of business and license type and that offers liability limits sufficient to cover potential payouts to your largest clients.

Buy E&O Insurance Online

And don’t forget to do your due diligence regarding all the entities involved. In the group or affinity marketplace, these typically include:

  • A sponsoring association,
  • An E&O insurance marketing firm/website,
  • An insurance third-party administrator, and
  • An insurance company.

If you’re considering buying group E&O insurance coverage, first take a look at the sponsoring organization. Many financial-professional trade associations offer E&O insurance for an extra fee as an ancillary membership benefit. Here, you want to make sure the association understands the needs of its members and has selected insurance partners who know what they’re doing. You also want an association with staying power; if it folds after you join and buy insurance—and your E&O coverage isn’t portable—you may be left with an E&O coverage gap. This can lead to problems if you suffer a loss during this period and your future E&O insurance refuses to cover your claim. National Ethics Association, sponsor of EOforLess, has a long track record of offering E&O insurance, launching its first product for life insurance agents in 2008.

Sponsoring organizations often partner with marketing entities to spread awareness of their plans and encourage prospective buyers to sign up. The National Ethics Association’s marketing resource is EOforLess, which provides an online shopping platform called EOforLess.com. A big consideration: make sure the marketing entity makes it quick and easy to shop for insurance. It should let you compare various options and then conveniently apply and pay for your coverage online. At EOforLess.com, most financial professionals can select a policy, bind, and print their certificate of coverage in just a few minutes.

Working in tandem with the sponsor and marketing firm, insurance third-party administrators (TPAs) handle the backroom functions of enrollment, billing, and customer service. It’s generally preferable to have a sponsor farm out administration to a highly capable specialist rather than attempt to do it in-house. That’s because a TPA will work with multiple sponsors and buyer pools, which gives it the scale to build or buy appropriate technology. It also give it the ability to house a large team of experienced customer-service representatives.  Most trade associations find it difficult to handle both of these functions internally, while still providing their core member benefits.

Clearly, since the insurance company is the entity that assumes your risk and is responsible for paying your E&O claim, focus most of your research on it.

  • Consider its A.M. Best rating as well those from other ratings agencies. Make sure the company falls within the top one or two grades, which indicates it will have the long-term solvency to stand behind its policies.
  • Check out its track record in the E&O marketplace. Is it an established player or a newcomer?
  • Determine if its E&O premiums have remained stable or whether it buys market share with low premiums, then increases them later?
  • See if it understands the risks of your specific profession and knows how to price for that risk?

Finally, solicit the opinions of other financial professionals who may have dealt with the firm in the past. Post queries on social-media communities such as Facebook, LinkedIn, and Insurance Forum to see whether people are satisfied with the firm’s customer service, especially with how it handles claims paying.

Bottom line? E&O insurance is your best protection against unforeseen disasters. But don’t buy coverage from just any association and marketing firm. Also, don’t assume that all third-party administrators and insurers are the same. Do your due diligence to buy the protection you really need at a price you can afford. We hope that after doing your homework, you’ll decide that the National Ethics Association and its marketing affiliate, EOforLess, are the firms for you. Good luck!