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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

E&O insurance is similar to other forms of insurance—for healthcare, property, automobiles—in one key respect. It typically requires consumers to absorb a pre-defined level of financial loss before it begins to pay an insurance benefit. Known as a deductible, this feature has been a common element of E&O insurance policies for financial professionals since time immemorial . . . until now.

That’s because the National Ethics Association, sponsor of EOforLess, has announced a no-deductible feature for its E&O coverage for life and health insurance agents. What this means is that agents embroiled in a legal dispute no longer have to pay for part of their legal fees up front. This frees up money to cover normal operating expenses, including office rent, employee salaries and benefits, agent retirement contributions, and more.

No Deductible E&O Insurance

No deductible E&O Insurance is a key enhancement to our E&O offerings for financial professionals,” says Steven R. McCarty, Co-Chairman and Founder, National Ethics Association. “With no deductibles, financial advisors facing legal action no longer have to worry about covering part of their legal fees. They simply can sit back and let their E&O insurer-appointed attorney defend them, while they focus on what they do best—selling and servicing their customers.”

Sponsored by the National Ethics Association, an organization of ethics-minded financial professionals, EOforLess entered the E&O marketplace in 2008, providing essential E&O insurance protection for life and health insurance agents. Rather than selling through brokers, EOforLess developed an advanced online buying platform. With this functionality, financial advisors no longer had to fill out long, confusing applications or wait hours or days to receive an insurance quote. EOforLess’ innovative e-commerce technology provided “click and bind” coverage in minutes, with no hassles or hidden fees. And this convenience came with substantial reductions in premiums over comparable plans.

https://www.eoforless.com/products/

E&O Insurance with No DeductibleSince then, EOforLess has further streamlined the purchase process, entered other markets, and added additional money-saving features such as free continuing-education (CE) courses for its insureds (except for real estate broker/owners).

In a world where consumers rarely receive something for nothing, how can life and health insurance agents avoid paying for deductibles? It all goes back to EOforLess’ original strategy of providing affordable, convenient E&O insurance for low-risk financial professionals. By effectively screening out high-risk financial advisors (think “good driver” auto insurance discounts), EOforLess has been able to develop a large customer pool with favorable claims experience. This allowed its insurance company to eliminate deductibles without hurting the financial dynamics of the group plan, while generating significant savings for EOforLess insureds.

Group Rates and Membership Benefits

Which raises another important difference with EOforLess. Because the coverage is group insurance, financial advisors not only save money due to their low-risk status, they also benefit financially from the inherent efficiencies of group insurance. And being members of a group—the National Ethics Association—makes them eligible for value-added benefits such as free CE courses, E&O loss-prevention content, purchasing discounts, and the use of online reputation badges for advisors who pass a comprehensive background check (requires additional fee).

McCarty says the best part about eliminating deductibles is that it also reduces stress for EOforLess customers. “Think about it,” he says. “Getting sued is a rough experience for most people. The last thing they want to worry about is coming up with money to pay for legal bills, while also working with their attorney to defend their business. By eliminating deductibles, we’re helping our customers get through a tough time with much less worry. This is what EOforLess is all about—less cost and less worry.”

Resources: https://en.wikipedia.org/wiki/Professional_liability_insurance#Errors_and_omissions_insurance

“Lying is an elementary means of self defense,” said American author and critic Susan Sontag. Many financial advisors would surely agree with that statement. Every day, they encounter prospects who lie in order to deflect their sales efforts. And even after they buy, clients may continue to deceive in order to cloak their inability (or unwillingness) to make decisions. Others are ashamed to admit their out-of-control spending or failure to handle important financial tasks. In short, people lie to avoid facing hard truths about themselves—and their advisor’s disapproval.

Dealing with lies every day can get under an advisor’s skin. As one commented on Insurance Forum several years ago, “You don’t know whether to laugh or to get mad at clients for thinking you’re stupid.” Rather than laughing or getting mad, advisors should realize that lies simply come with the territory. When you’re working with people on sensitive issues such as retirement, disability, death, and money (especially money!), it’s only natural for people to deceive. If advisors get upset every time this happens, they won’t be advisors much longer.

Still, we believe financial professionals can be a little too accepting of client untruths. When they fail to challenge them, bad things can happen. For example, a smoking prospect who claims to be a non-smoker on a life insurance application can jeopardize her beneficiary’s death benefit if she dies within the two-year contestability period. And what about clients who lie about their shopping or gambling addictions? Can advisors justify ignoring behavior that can devastate a family’s finances?

And there’s the matter of legal exposure. Working with deceptive clients can lead to intra-family conflict, compliance lapses, and illegal conduct, leading to potential lawsuits and errors-and-omissions claims.

The point is this: advisors can safely shrug off most client lies. But some must be challenged to protect the client and the advisor. How? By improving your ability to detect them and by becoming more confident at meeting them head on.

How to detect lies? Our first advice is to ignore a lot of what you read in the popular press. Many self-proclaimed experts suggest that when clients look up and to the left or appear stressed out or nervous are red flags. Wrong! According to Maria Hartwig, Ph.D., an associate professor at the John Jay College of Criminal Justice in New York City, nonverbal behaviors such as gaze aversion, fidgeting, and changing posture have no scientific value in detecting human deception. In fact, the U.S. Transportation Security Administration invested some $ 1 billion to evaluate methods of “reading” facial expressions and other nonverbal clues in order to identify terrorists. Government auditors have uncovered few positive results from these efforts. What’s more, a wide-ranging review of the scientific literature revealed people can spot lies only about 47 percent of the time, which is less than by chance. “The common sense notion that liars betray themselves through body language appears to be little more than a cultural fiction,” Professor Hartwig told the New York Times last year.

Despite scientific debunking, so-called experts continue to argue that signs of emotion and stress are markers of deception. However, many people can easily control their emotions when lying, while others may appear anxious for totally unrelated reasons. A better approach: focus less on emotions and more on the cognitive task of lying itself. In other words, recognize that emotions are easily masked during deception, but cognitive effort is not. So if you can detect a “high cognitive load” and/or reasoning flaws in verbal answers, you’ll be on more solid ground.

For example, let’s say you’re doing fact-finding with a male client (his wife couldn’t get off work). In probing the man’s risk tolerance, you get credible, confident answers. But when you ask about the woman’s appetite for risk, the man stares without blinking and his posture stiffens while he considers his answer. As he describes his wife’s “money personality,” his halting delivery stands in stark contrast to his former speaking style. Based on the cognitive load theory of lie detection, it might be wise to push for a separate conversation with the wife to confirm what the husband said.

Experts suggest also watching for behavior such as repeating identical phrases; giving short, superficial answers; pausing between sentences; evading questions; talking in a strangely impersonal tone; and shifting the discussion to third parties and other topics.

In addition to seeking evidence of “cognitive load,” pay close attention to inconsistencies. For example, a client might promise to keep her spouse fully informed about future investment purchases, but refuse to provide his cell phone number for the file. If she was so committed to transparency, why is she so reluctant to provide her phone number?

Also look for conflicting fact patterns. For example, a client might claim to have no health problems during underwriting for a new life policy. However, an application taken a few years ago revealed a chronic irreversible condition. How can someone have perfect health and a chronic condition at the same time?

Assuming the above techniques help you to catch a person in a lie, your first reaction might be to gloss over it. This might be fine with routine lies that are nothing more than buying objections, including:

  • My brother-in-law is my agent.
  • Just send me some written information and I’ll look it over.
  • I missed the meeting because I had a doctor’s appointment.
  • I never received your proposal in the mail.

Statements such as these might not always be lies. But when a prospect repeatedly dodges your sales probes and closing attempts with flimsy excuses, refocus your efforts on identifying legitimate needs and responding to underlying objections. If the person continues to lie, then consider moving on to the next sale.

However, some client lies are impossible to ignore. Clients who lie in order to prevent a negative event (getting declined for life insurance) or augment a positive event (misstating age to get a larger benefit) should be viewed as trouble magnets. Proceed very carefully in such cases.

So the next time a prospect or client lies to you regarding a serious matter, take a deep breath, then . . .

  • Give the person the benefit of the doubt. Don’t automatically assume the person is lying. Probe to see if there’s a misunderstanding.
  • If there is no misunderstanding, call the lie out. Let the client know that it’s in both of your best interests to be completely forthright. Then ask for a clarification of the person’s prior statement.
  • If the person resists coming clean, make the point that a productive advisor/client relationship demands full transparency and candor. Without it, you won’t be able to do your best work. Plus, if the person isn’t being truthful now, how can you ever fully trust him or her in the future?
  • Being caught in a lie can upset clients. So gently communicate your empathy and explain you will hold nothing against them. But if they refuse, say you’ll need to reconsider your ability to serve them in the future.

By getting better at detecting and confronting client lies in this fashion, you’ll create a more enjoyable, less stressful work environment, while minimizing errors-and-omissions claims in the future. Why give liars a pass when the vast majority of clients can be counted on to tell the truth?

For information on ethical sales practices, please visit the National Ethics Association’s Ethics Center. For more information on affordable errors and omissions insurance for low-risk financial advisors, visit E&OforLess.com.