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The Era of the Handshake Deal is Long Gone

Sad to say, the era of the handshake deal has passed. Decades ago, it took only a signature and a handshake for a financial professional to close a sale with a prospect. Those were the days when a person’s word meant something. Advisors would do their best to make suitable recommendations, clients would accept those recommendations in good faith, and a handshake would ratify the advisor/client relationship, which often lasted an entire lifetime.

Boy, have things changed! Now, closing a sale requires jumping through numerous compliance hoops. Both advisor and prospect must sign multiple forms: replacement, risk profile, suitability, and soon, family contact (for reporting of suspected senior abuse). All of this dotting of I’s and crossing of T’s has made the sales process more legalistic and adversarial. Result: the implicit trust financial professionals and their clients quickly established is now more fleeting. In short, the assumption today is that each party, given half an opportunity, is out to victimize the other, and that each has to adopt a defensive posture from the outset.

It gets worse. This compliance process makes the sales process longer and more complicated. And it gives prospects more opportunities to back out. But there’s an even larger issue at stake. By making the sales process more legalistic, companies have trained consumers to expect the worst. And when mistakes happen, consumers are more likely to feel aggrieved and to take legal action.

For this reason, even though they may feel their clients are reasonable, financial professionals must protect themselves against risky individuals who react negatively to problems real or imagined. This means purchasing high quality, affordable errors-and-omissions insurance from firms such as EOforLess.com, which works with financial advisors.

What Does an Errors & Omissions Policy Protect You Against?

Errors-and-omissions insurance is the answer for financial professionals who wish to build a sustainable business in this environment. Because there are more angry clients and lawsuits these days, advisors simply can’t afford to go uninsured.

What does an errors & omissions policy protect you against? Simply put, it generates funds that help advisors deal with the aftermath of making a mistake (or failing to act) that harms a client. Policies are designed to provide cash to hire an attorney to defend you and to make good on any judgments or settlements that emerge from a judicial process. They also pay for court costs and the fees incurred in finding and retaining expert witnesses.

Now, you may be thinking, “I know how to do my job and the chances of my making a mistake are slim.” We have two responses to that.

First, financial professionals are human, and as such, susceptible to making errors, period. They have lots of things on their plates and might forget to handle an important transaction for a client.

Second,  one of their staff members might drop the ball, financially harming a client. The possibilities are endless. For example, life and health insurance agents might recommend the wrong annuity for an elderly client or fail to stay on top of a customer’s changing needs for life insurance. Or they might neglect to execute a client request, which ends up costing the person money.

Similarly, on the property-casualty side, there are countless ways to make a mistake, including failing to . . .

  • secure appropriate coverage,
  • recommend policies with adequate limits, or
  • properly explain coverage exclusions or policy limitations.

Whatever the mistake, and whatever your license type, the combination of existing advisor/client chemistry, client anger, and financial loss can quickly explode into a damaging lawsuit. When this happens, you need an errors-and-omissions policy (and insurer) to preserve your precious financial assets.

Protect Yourself Against Negligence Claims

Given the high number of risks for getting sued today, it’s imperative to protect yourself against negligence claims. How? By assessing your needs for errors & omissions insurance and by selecting an affordable solution that meets those needs. As a first step, we recommend evaluating the policies available from EOforLess.com, an online shopping service for financial professionals.

Unlike working with a traditional E&O insurance broker, which involves filling out complex applications and waiting days or weeks for the broker to secure a quote from several insurance companies, buying errors & omissions from EOforLess.com typically takes 5 minutes or less. You simply . . .

  • visit our user-friendly website,
  • select your policy type and desired insurance coverage amount,
  • complete the application,
  • pay for the insurance, and
  • immediately print out your proof of insurance.

Nothing could be easier than purchasing E&O insurance from EOforLess.com.

In summary, everyone wishes the “good old days” came back—a time when advisors and their clients trusted each other and sealed deals with a handshake. But that time is gone forever. Now, consumers must do adequate due diligence on their financial advisors, and advisors must protect themselves against litigious clients. For financial professionals, this starts with protecting their current assets and future earnings potential with errors & omissions insurance.

What a Policy of Errors & Omissions Can Do for You

As with all forms of insurance, E&O insurance can be hard to understand. And that’s under the best of circumstances when a business owner has plenty of time to learn about this essential coverage. So what do so many business misunderstand about E&O insurance?

For one thing, they assume it’s a “nice-to-have” type of insurance, assuming there are discretionary funds available. But since many solo financial professionals or those who run boutique operations only have slim margins over expenses, E&O insurance is viewed as a luxury. However, protecting yourself against E&O claims can literally spell the difference between your business surviving a major lawsuit and crumbling in the face of an insurmountable judgment.

For another thing, businesses view client lawsuits as something that happens to other firms. You know, to the ones that never established a desired client profile or that skimped on customer service in order to maximize profits. Not true. E&O claims happen even to firms that add new clients with care or who invest heavily in customer service. That’s because no matter how capable they are at customer service, employees are human and prone to making mistakes.

Finally, financial professionals assume that clients are more likely to bring suit against larger firms, viewing them as having more resources with which to settle a lawsuit. Again, this is a misperception. In fact, according to a study conducted by the U.S. Chamber Institute for Legal Reform, small firms shouldered the vast majority of tort liability costs ($105.4 billion in 2008), even though they represented only 22 percent of all business revenue. Presumably, large firms with extensive legal support are better equipped at making frivolous lawsuits “go away.”

Here’s our point: If you’re serious about succeeding in business, don’t fall prey to common misunderstandings about E&O insurance. Accept that it’s a crucial form of insurance protection, which nearly every small business needs in today’s litigious environment.

Do you understand what a policy of errors & omissions can do for you? If not, read on.

Boiled down to its core essence, E&O insurance makes your firm whole in the event it loses a client lawsuit and a judge hands down a large legal judgment against you. In this event, E&O insurance provides funds to retain an attorney to defend you and to indemnify the plaintiff should you lose in court.  It also pays for court costs as well as the expense of retaining an expert witness to testify on your behalf. But the essential features of cash to pay for legal advice and money to discharge a legal judgment are what you really need to know about E&O insurance. Without those two benefits, many financial professionals are unable to emerge intact from a legal battle they fight hard to win, but lose.

E&O Insurance Is Not Commercial General Liability Insurance

Financial professionals often assume that purchasing a commercial general liability (CGL) policy will cover their E&O losses also. Unfortunately, CGL policies are not designed to protect firms against E&O problems. For example, CGL insurance will not pay benefits if your error or omission causes a customer to lose money. It will only pay when your mistake produces property damage or bodily injury to your buyers or to a customer of your customer.

There are a number of other differences between CGL policies and E&O insurance. Suffice it to say, if you’re involved in the sale and delivery of financial services, it’s important to have both CGL insurance and E&O insurance to have comprehensive protection —as well as full peace of mind.

Your Best Defense against Lawsuits, Damages, and Counterfeit Claims

In short, your best defense against lawsuits, damages, and other business claims is to do business ethically, legally, and with a commitment to quality in every facet of your business. However, as we mentioned earlier, mistakes do happen. So it’s also important to defend yourself against lawsuits by purchasing a high quality, affordable E&O insurance policy that will provide funds to pay for legal judgments and settlements that otherwise might bankrupt your firm.

The bottom line? Would you drive your car without auto insurance? Raise a family without insuring their medical expenses? Buy a house without insuring it against fire and theft? Of course not! So why would you operate a business without protecting it against the threat of getting sued?

Do the wise thing and protect your business against E&O claims today. And if you’re pressed for time, considering purchasing E&O insurance from an online provider such as EOforLess.com. By visiting our user-friendly site, you will be able to select, apply for, and print out your proof of coverage in short order. It’s yet another reason to do the right thing for your business before it’s too late.

E&O Insurance for Your Business

Do you need E&O insurance for your business? Almost all financial professionals ask themselves this question at one point or another in their careers.  Many answer, “yes” because they perceive themselves to be operating in dangerous times.

Think about it. Insurance and financial advisors deal with complex client needs—savings for retirement, protecting estates, insuring valuable property, etc.  The products they sell can be difficult to understand and explain. Marketplace volatility can produce client losses. And the manufacturers of insurance and financial-services products can fail to stand behind their promises to both the people who sell their offerings and the ultimate consumer. Take all these factors into account and what do you have?  An extraordinary degree of risk for insurance and financial advisors doing business today.

As a result, financial professionals must ask themselves how comfortable they are dealing with such risks. Are they so confident in their expertise that they believe they’ll never make a mistake? Or do they realize that mistakes can happen to any financial practitioner at any time . . . even to those with high degrees of integrity and competence? If you fall into the latter camp, then you fully understand why buying E&O insurance for your business is a wise decision. It simply reflects the inherent risks implicit in doing business, as well as the impossibility of performing flawlessly with every client, in every transaction.

As if this weren’t disturbing enough, consider the types of mistakes financial practitioners are prone to make.

Worst-Case Scenario

According to one major E&O insurer serving the life/health insurance segment, there are at least 11 potential mistakes an agent can make. They range from . . .

  • misrepresentation,
  • due diligence problems,
  • premium errors,
  • office mistakes,
  • failure to explain or provide coverage,
  • tax losses,
  • beneficiary-related mistakes,
  • policy change errors,
  • suitability issues, and
  • business management lapses.

Of all those mistakes the top three most common are misrepresentation (25 percent of the total errors), failure to provide coverage (13 percent), and failure to explain coverage and office errors (both tied at 11 percent).

Compounding the risk is this fact: E&O mistakes carry high price tags. For example, the same insurer found that the average cost of an E&O disability-insurance claim was roughly $149,000. For pension products and individual life policies, the average claim costs were $71,000 and $40,500, respectively. Worst-case scenario? Making multiple mistakes within a single customer account, which could add up to hundreds of thousands of dollars in personal liability, potentially leading to the death of your business and a devastating personal bankruptcy.

Protectioneoforless

Faced with risks such as these, most savvy financial professionals decide that buying an E&O insurance policy is a wise decision. What exactly does an E&O policy provide? Simply put, it provides protection—money that cushions the costly financial aftermath in the event you lose a lawsuit in court. E&O insurance provides money . . .

  • to hire an attorney to defend you,
  • to pay for legal judgments and settlements, and
  • to pay for court costs levied in the proceeding.

By having E&O insurance, you avoid being personally liable for the direct and indirect financial costs resulting from your error or omission. Your E&O insurance policy should cover these obligations for you, up to your policy’s limits.

Two other benefits of E&O insurance are less obvious. The first is having an E&O insurance claims adjuster on your side to help manage the claim-settlement process. This can be an enormous time saver. The second is the fact that having E&O insurance for your business reduces your stress and worry should you ever get sued. Not only will you sleep easier at night, you’ll also have more time and energy to spend working on your business rather than hassling with a customer complaint or lawsuit.

Strategy

Given the risks and costs just discussed, what strategy should you follow to mitigate your E&O risks? Many experts suggest finding high-quality coverage, at an affordable price and then buying it in the most convenient way possible. To secure high-quality coverage, make sure the policy is designed to precisely accommodate the needs of your business model and license type. For example, if you provide investment-advisory services, then trying to save money by purchasing E&O coverage for life/health agents may be penny-wise and pound-foolish. Also be sure to read the specimen policy to see exactly how the insurer frames the “insuring clause” (what it promises to cover) and its exclusions (what it will not cover).

To secure affordable protection, investigate programs available through professional associations devoted to your business. Such protection is typically issued on a group basis and can be more cost-effective than individually issued policies.  Also, check to see if the E&O provider attempts to reward financial professionals who adhere to low-risk business practices. Typically, such insurers offer streamlined underwriting screens in which answering no to, say, 10 risk-assessment questions will qualify you for “preferred-risk” pricing. The savings in this case can be substantial.

Finally, consider whether you want to purchase your E&O insurance through a conventional insurance broker or on an online E&O insurance platform. The former method may be appropriate for advisors with complex businesses with large risks. But the downside of buying through a broker is that it will take more time for the person to submit a long application form to one or several carriers and then to receive a proposal back from. Buying through an online E&O provider is typically much faster. For example, at EOforLess.com, you can typically input your information, answer the underwriting questions, and then pay and bind your coverage in 5 minutes or less.

Whatever you decide, the important thing is that you protect your business against the many risks it faces in today’s risky environment.  If you want to assure your professional future, buying E&O insurance for your business is truly the most sensible way to go.

Buy E&O insurance for your business

Click, Bind and Print E&O Insurance Online

Affordable E&O Insurance Online

Buying insurance is increasingly becoming an online affair. Just witness the growing number of financial professionals today who buy and print E&O insurance online. This should come as no surprise for two reasons.

  • First, insurance and financial advisors know just how risky their business can be. Clients with complaints, imagined or real, can bring suit, resulting in judgments costing tens or hundreds of thousands of dollars. Financial professionals understand that self-insuring against such risks can have devastating consequences for the sustainability of their firms and careers.
  • Second, professionals who sell insurance and financial products are busy people. Spending days or weeks shopping for E&O insurance is simply time they don’t have. Instead, thanks to technology advances, they are increasingly buying their E&O insurance online. Using websites such as EOforLess.com, they can quickly input their information, answer some risk-profiling questions, add their payment information, and within a few minutes print out a certificate of insurance. A buying process that used to take weeks now happens in minutes, freeing up time for other important business tasks.

What is E&O Insurance?

Errors-and-omissions insurance—or E&O insurance as it’s commonly called—is a type of professional liability insurance that protects business professionals in the event they do something wrong or fail to perform an important activity that financially harms a client. Policies provide two forms of protection: funds to hire an attorney to defend the insured in court and money to pay for legal judgments and court costs if the plaintiff (party suing) wins the case.

“Years ago, many business professionals didn’t think much about E&O insurance,” says Steven R. McCarty, Co-Chairman and Founder, EOforLess. “Today, they understand it’s a crucial form of insurance for virtually everyone who works in a sales or client-advisory capacity in a financial-services business.”

The risk of going uninsured is profound for such individuals, according to McCarty. The average cost of an insurance- or investment – related lawsuit can range from $40,000 to $150,000 or more. E&O insurance exists to mitigate these risks so financial professionals can continue to work in their firms and provide for their families. In many cases, without sufficient E&O insurance coverage, the only feasible outcome for those who lose court battles is to declare bankruptcy.

Who is EOforLess.com?

Given the importance of securing E&O insurance protection as quickly and conveniently as possible, the insurance industry has fostered innovation to increase access to E&O insurance online. A major player in this regard is EOforLess.com. Launched in 2008, it currently offers E&O insurance to financial professionals selling under various licenses, as well as to real estate broker/owners. It pioneered the direct sale of E&O insurance online—i.e., dispensing with the need to work with a broker—providing a unique shopping platform that makes buying E&O insurance faster and easier than ever before.

EOforLess.comRemoving brokers from the sales process is key to EOforLess.com’s strategy. Because financial professionals can select their desired E&O product, submit their information, and buy online, they can get insured in minutes rather than weeks. According to the Midwest Insurance Agency Alliance, many E&O insurance companies take up to two weeks to provide a premium quote after a broker submits an application. This antiquated process can literally cost big money if the delay short circuits a financial professional’s ability to receive an appointment to sell an insurance or investment provider’s products.

Another important aspect of EOforLess is its focus on low-risk insurance and financial advisors, which allows it to offer affordable premiums and, in some cases, eliminate deductibles (thresholds that must be met before the insurer begins providing benefits). If financial professionals can answer no to a limited number of risk-assessment questions, they can qualify for EOforLess.com’s competitively-priced coverage, which can be customized for each advisor’s specific needs.

“Providing convenient, affordable E&O Insurance has been in our DNA since Day 1, says EOforLess.com’s Steve McCarty, who is also Chairman and Co-Founder of the National Ethics Association, sponsor of EOforLess.com.

Who is the National Ethics Association?

The National Ethics Association is an association of business professionals committed to building their firms on a foundation of trust, transparency, and best practices. Formed in 2001, the Association provides an array of services that helps members grow their online reputations while enhancing their overall marketing efforts. Member benefits include credibility icons that build professional reputation; ethics and compliance content that improves business quality and prevents customer disputes; certified background checks that accelerate the consumer sales process; and a wide array of purchase discounts for companies such as Staples, Verizon, Costco, and Dell.
National Ethics Association
Another important benefit is the ability to purchase convenient and affordable E&O insurance through NEA affiliate, EOforLess.com. Through their membership in the National Ethics Association and their ability to pass EOforLess’s risk assessment, NEA members are eligible to purchase E&O insurance protection on a group basis through a variety of highly rated insurance underwriters such as CNA, Everest, and Liberty International Underwriters.

“By combining the efforts of the National Ethics Association, EOforLess, and our insurance partners, we’re helping thousands of financial professionals do business with less risk, expense, and worry than ever before,” NEA’s McCarty says. “This much is clear—it’s a great time for financial professionals to buy E&O insurance online.”

 

Learn More about How P&C Agents buy their E&O Insurance Onlinehttp://www.ibamag.com/infocus/e-o/how-pc-agents-buy-their-eando-insurance-today-21236.aspx