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A Contrarian View: Top Ten Reasons NOT to Buy E&O Insurance

On most days, you’re likely to hear us speak of the benefits of owning E&O insurance. But today, we’d like to take a contrarian (and somewhat lighthearted) view. To that end, here are 10 reasons why financial professionals should avoid buying E&O insurance. Ready?

Reason #1. You’re tired of being a life insurance agent, investment advisor, P&C insurance agent, or a real estate agent or broker/owner. You want out of your career, but can’t quite figure out how to extricate yourself.

Have you ever felt trapped in your current career, knowing you’ve had enough, but unsure of how to break free? Well, not buying E&O insurance or failing to keep your policy in force can be a perfect solution. If you get embroiled in a client dispute and end up losing your case without E&O protection, you might end up totally liberated! For example, all of your personal and business assets may need to be liquidated to satisfy court judgments or settlements. With no assets to speak of, including no business resources, you won’t be able to work in financial services or perhaps in any field. In short, you’ll be free of everything you’ve grown tired of and able to try something new . . . or nothing at all!

Reason #2. You have so much debt now that an E&O judgment will likely bring bankruptcy relief.

If you’re like many Americans, you probably carry too much debt, both personally and professionally. Most people soldier on with their heavy debt loads, paying the minimum amount due each month and looking at nothing but years of unrelenting loan payments. However, without E&O insurance, a legal judgment may be a great excuse to file for bankruptcy and get your financial life back.  Also, don’t minimize the personal satisfaction of telling one’s creditors to get lost. Declaring bankruptcy can be worthwhile from this perspective alone!

Reason #3. You’d rather just concede defeat to a client suing you than be forced to participate in a boring court proceeding.

We get this! Having interminable conversations with a lawyer who’s trying to protect your assets is SO boring. And sitting in a courtroom for hours when you could leave work early to play golf or have a beer at the brewpub is SO annoying. For those financial professionals who’d rather hand over everything they own than spend even a minute speaking with their attorney or sitting in a courtroom, this reason is for you!

Reason #4. You believe in the carpe diem philosophy (“seize the day”). In other words, you see no reason to spend money to protect your future security when you can spend it to enhance your current happiness.

In other words, you’re the kind of person who lives for today because who knows what tomorrow will bring. You’re more than happy to go unprotected because chances are nothing bad will happen. Plus, it’s a lot more fun to spend your money on food, drink, and vacations than to make sure your future is safe and secure. Right?

Reason #5. You believe your mistakes are best put behind you, not taken responsibility for.

As part of the human condition, mistakes happen. For this reason, they’re hard to prevent and pointless to get worked up over.  As a result, when you make a mistake, you believe it’s best to move on and let the chips fall where they may. This being true, what’s the point of having E&O insurance, a policy that helps you take full responsibility for your mistakes? Other people can clean up after you so you can just get on with your life. In this regard, paying for E&O insurance is pointless and stupid.

Reason #6. Client disputes are entertaining and best prolonged for maximum enjoyment.

You’re a big fan of Judge Judy. You find human conflict to be fun and love watching courtroom battles on TV. Because of your fascination with legal drama, you’d prefer to prolong the experience if you’re ever sued. You’d do this by defending yourself in court rather than allowing a trained attorney to more efficiently represent you.

Reason #7. Similarly, you believe the only person who can competently defend you in court is you.

In part, you believe this because you have found that the smartest person you know is you. You have also found that no one knows more about winning than you. With bottomless self-confidence, you see no reason to waste money on E&O insurance, which, frankly, will only saddle you with an attorney who’s dumber than you.

Reason #8. It’s best not to have E&O insurance because clients will be motivated to sue you.

It’s a dark view of humanity, but it’s your view. You sincerely believe that everyone is selfish and, given half an opportunity, out to hurt you.  Consequently, you’re convinced that if your clients learn about your E&O coverage, they will ignore your years of service and good advice and contrive a reason to sue you. And all of your clients are like this. 

Reason #9. You’ve never been sued before, and you don’t plan on being sued now.

You’ve been in the industry for decades and have never been sued. Why would clients start suing you now? What could possibly change?

Reason #10. E&O insurance is too expensive for the value received.

Since it’s unlikely you’ll ever get sued, you probably will never use your policy. Paying for a service you’ll never need is a gross extravagance. Why waste the money? And under what scenario would you ever need to use your policy?

With 10 reasons like these, it’s surprising any financial professional buys E&O insurance, ever. They wisely put their money toward more productive uses and let the legal chips fall where they may.  Yet hundreds of thousands do purchase E&O insurance and continue to pay for their E&O premiums year after year, despite never getting sued and having many other legitimate uses for their money.

Hmmm, what do these sensible financial professionals know that the naysayers do not?

­Whatever your license type—life or health insurance, securities broker, registered investment advisor, property-casualty agent, or real estate broker owner—cybersecurity should top your list of risk-management concerns. As recent news has repeatedly shown, financial professionals of all stripes face increasing cyber risks. And those who continue doing business as usual are setting themselves up for potentially catastrophic outcomes.

­The good news is agents and advisors have two powerful avenues of self-defense: insurance and security best practices.

Now, if  you thought E&O insurance didn’t protect against cyberattacks, you’re not alone. Many financial professionals assume they need dedicated cyberinsurance to receive the most comprehensive protection. And they’re correct. However, you can still receive basic coverage through your E&O insurance policy. Here’s how that works:

Today’s E&O insurance policies not only protect you against the standard risks of making a mistake or failing to do something important, they now also cover you against certain cyberrisks. For example, EOforLess’s life insurance agent E&O has a client network damage and privacy claim endorsement. This means you will have protection against plaintiff lawsuits relating to an alleged electronic infection that harms a client’s network. The loss must result from you providing covered professional services to the client. In other words, if a client picks up a computer virus (and sustains a financial loss as a result) from having accessed your computer network, your E&O policy can indemnify that person or entity within the limits and definitions of your policy (and the specific wording of its network endorsement). However, it’s important to realize that standalone cyberinsurance offers much more comprehensive protection.

What about common-sense security practices? Actually, implementing a surprisingly short list of measures can go a long way toward keeping you and your clients safe. Here are some of the best measures to implement:

    1. Threat awareness. Part of having secure computers and networks is being aware of the threats you face. To this end, follow industry trade publications to stay current on the cyberattacks and breaches financial entities have suffered recently. Also, visit the Financial Services Information Sharing and Analysis Center to learn more about recent incidents.
    2. Secure passwords. Even in this day and age, a surprising number of people still have poor password hygiene. They use their names and birthdays, rely on simplistic words and phrases, and fail to lock down their passwords against prying eyes and thieving hands. By mandating the use of a password management application, you can vastly augment your firm’s cybersecurity. Such apps simply ask you and your staff to remember one master password. Then through an Internet browser extension, they automatically serve up longer, more complex passwords when you visit websites. This means you’ll no longer need to know or save potentially hundreds of passwords.
    3. Multi-factor authentication (MFA). MFA is a security approach that depends on two or more methods of authenticating a user’s identity before allowing a log-in or other transaction. It typically combines what the user knows (i.e., a password), what the user has (a security token or code), and what the user is (biometric verification as in a smartphone’s built-in fingerprint reader). Having multiple security layers makes it harder for intruders to break into a device or network, since they need to have not only your password, but also your token device and biometric data.
    4. Security best practices. A large number of cyberbreaches occur due to employees’ unsafe computing practices. For example, they often fall prey to e-mail phishing attacks in which they clink on a URL within an email. This then infects their computer with a virus or other code that can lead to unauthorized break-ins. Even worse, online criminals now use increasingly plausible approaches to dupe employees into clicking on malicious links. Solution? Constant employee training on security awareness and best defensive practices.
    5. Data encryption. Make it your business to learn how to encrypt all client data before sending it over e-mail or via other channels. This is a critical element for safeguarding business and customer data.
    6. Destroy old hardware. If you are disposing of obsolete computers or other devices, make sure to magnetically erase the equipment. Otherwise, criminals may find a way to access the data on the computers or devices and use it to perpetrate a breach to your current hardware and networks.
    7. Install  software patches (updates). As the latest cyberattacks are foiled, computer and system vendors typically update their software to fix bugs and close back doors that lead to breaches. However, if you don’t take advantage of those updates, your data will remain susceptible to attack.

The point is this: Cybersecurity is no longer the province of information technology (IT) professionals. Insurance and financial advisors need to stay abreast of the latest threats and adopt protective measures as soon as possible. By keeping informed, adopting best practices, and relying on their E&O and cyberinsurance policies as backstops, they should be well protected against potentially devastating cyberattacks. Good luck!

Six Trust Building Strategies for Life Insurance Agents

Trust doesn’t just happen. You can’t create it with a snappy call to action or a clever objection response. It’s something you have to earn daily through your words and actions. For this reason, building trust requires a deliberate, multi-faceted strategy, nurtured steadily over months and years. What goes into this effort? Five powerful trust-building tactics, ending with an E&O insurance kicker.

Adhere to Five Ethical Practices to Instill Trust

It’s hard to deny that contemporary selling depends less these days on product appeals and hard persuasion techniques and more on information sharing and low-pressure counseling. This is especially true with Millennial clients, the industry’s prime target market now that Baby Boomers are retiring in great numbers. The last thing such prospects want is a life insurance agent launching aggressive sales salvos at them. Instead, they want to collaborate with their agents to solve problems. For this reason, ethical sales practices are an absolute requirement for creating trust with such buyers. Here are five essential ways to accelerate this process, especially with younger prospects.

1. Commit yourself to total credibility throughout the sales process. In today’s environment, it’s important to avoid misleading statements or exaggerations. This means you should avoid dubious claims and support your statements with third-party, objective evidence. In short, your words and actions must always be 100 percent beyond reproach.

2. Be completely reliable in terms of the promises you make. Put yourself in your clients’ shoes. How will they feel when their life insurance agent fails to return calls, to complete the research he committed to, or forgets to execute a requested service transaction? Disappointed is probably an understatement. Frankly, it won’t take many dashed promises for them to lose all faith. Lacking faith, they will be more likely to defect to a competitor. Solution? Sweat the small stuff, so clients can count on you every time.

3. Become client focused, not self-focused. We all know how much fun it is to speak and how boring it can be to listen to others. But listening to your clients is crucial if you want to establish long-term trust. It’s the only way you’ll really understand their fears, problems, objectives, and constraints. But listening is just the starting point. You have to commit to becoming a “high-touch” agent, staying in close contact, especially when markets are volatile. Finally, being client-focused hinges on you safeguarding their personal information, documents, and confidences. Never sharing client details with a colleague, family member, or friend will accelerate the trust-building process.

4. Commit to total transparency both during and after the sales process. The more information you convey about yourself and your firm, above and beyond the required disclosures, the quicker you’ll attain trusted-advisor status. To this end, encourage prospects to check you out using third-party sources such as FINRA’s BrokerCheck, the Better Business Bureau, and the National Ethics Association (sponsor of EOforLess).

5. Adopt a fiduciary mindset. Even if you are not legally required to act as a fiduciary, consider acting as one anyway. When prospects and clients see you are putting their needs ahead of your own, that you place ethics above self-dealing, they will come to trust you implicitly.

Position Yourself as a Responsible Life Insurance Agent

In addition to the above steps, strive to demonstrate you are a responsible financial professional. In others words, show prospects that your business practices are reasonable and that if you make a mistake or fail to do something important, you will make things right.

Start by discussing how you do business—that your recommendations derive from rigorous fact-finding and that all the financial products (and companies) you recommend have been rigorously vetted. What’s more, convey that everything you do on their behalf is mainstream and that your operations and procedures are bulletproof, especially when it comes to data security.

Then make a point of saying that you practice what you preach as a life insurance agent. Not only do you help your clients mitigate their financial risks through sound planning, you also do the same for your own business. This means you have financial backstops in place in case a financial-product company fails, a client gets hurt while visiting your office, or you make an error that financially harms a client. These protections take the form of SIPC insurance on securities purchases, state insurance guarantee funds for life policies and annuities, commercial general liability insurance (CGL) for office visitors, and E&O insurance for your professional mistakes and omissions.

Now here comes the kicker. Having E&O insurance from EOforLess may well be the most important element of all. Not only does it give clients peace of mind, it frees you to do your best work. In other words, E&O insurance coverage helps you  focus exclusively on your work rather than always second-guessing whether a recommendation exposes you to professional liability.

At the end of the day, building trusting client relationships will accelerate your success in the life insurance industry and help you to achieve your long-term financial objectives. If this doesn’t create peace of mind for you and your family, what will?

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?