Broker errors and omissions (E&O) claims grew during the pandemic for those who failed to maintain adequate levels of coverage for their clients, a broker E&O specialist says.
While home and auto claims were down due to lockdowns, resulting in a softening of broker E&O claims, there was growth in activity for other reasons, reports Hugh Fardy, senior vice president of professional liability for Gallagher’s Ontario region.
“Client reductions in coverage to save money comes back to bite the broker who didn’t discuss and advise against before processing,” Fardy tells Canadian Underwriter. “We have a hard market at the same time, and saw great difficulty in things such as non-renewals and coverage reductions. Overall cost of building replacement has become a major issue, and keeping insurance and appropriate levels difficult.”
Fardy made his comments in response to a question about whether he’s seen any changes or trends in broker E&O in the two-plus years since the COVID-19 pandemic began.
Canadian Underwriter has heard brokers’ clients may sometimes focus more on price than coverage, particularly during tough financial times. Has that been amplified during the pandemic?
“Yes, people were looking to save money, and focus on price overshadowed coverage issues,” Fardy confirms of client behaviours. “Unfortunately, the industry [has] too much [of a] price narrative these days, and buyers hear that and assume coverage isn’t their issue.”
The broker value proposition in Canada is often described to consumers as “the right coverage for the right price.” But with hard market conditions (higher prices and deductibles) and shrinking capacity in some lines, it can be difficult for a broker to keep the conversation focused on cover and value rather than price.
“I will stipulate there are buyers who only want to pay less and have little if any concern about cover,” Fardy said in a LinkedIn post last year. “They may continue to shop each year, may pose extra E&O exposure [for the broker], and may be an accounts receivable issue.”
The industry needs to change the narrative about insurance, Fardy says, so the focus is on getting as much advice as possible into the client’s hands.
Again, too much focus on price may lead to increased E&O exposure for brokers. “Focus on advice it has to be,” Fardy says in the LinkedIn post. “[If] too many believe in price, [that] may be the downfall of insurance ‘advisors.’”