November 28, 2018 by Jason Contant
The risk of a greater errors and omissions (E&O) exposure is a major reason why some brokers choose not to place business with a managing general agent (MGA), speakers said Tuesday at Insurance-Canada.ca’s MGA Technology Symposium in Toronto.
“We don’t want to have the issue of accountability that could come up with claims,” said Brenda Rose, vice president and partner with Toronto-based FCA Insurance Brokers. “Sometimes with an MGA, we are so far at arm’s length when there’s a claim, we can’t find anybody to advocate with, and that’s a clear difference from what the situation is with a contract market,” Rose said, referring to business placed with a “regular” insurer.
Another speaker said he once discovered there was a $200,000 bodily injury sublimit attached to the liability in a policy. “When did I ever ask for that? It’s not very apparent to me any disclosure was given to that sublimit,” said Colin Marshall, vice president of Will Marshall Insurance Brokers in Barrie, Ont., noting that this case did not involve one of his clients. “It’s very, very buried in the wordings. So that really opened our eyes to the potential for an E&O problem going forward.”
There is a greater E&O exposure if an MGA uses different forms to fill out than what a brokerage staff member is used to, particularly in situations in which a junior staff member is interacting with the MGA, Rose pointed out. Marshall agreed, saying “having a junior broker using an MGA, you definitely have to hold their hand and tell them this is more of a classic type of insurance policy, where if the renewal day comes and it’s not paid, you ditch that policy.”
Regulation and accountability also factor into the decision to choose an MGA or not. “With our regular markets, we know exactly who they are accountable to and how they are being monitored,” Rose said during the panel discussion Brokers are Changing: Are you Keeping Up? “With an MGA, we have to do all that due diligence ourselves.”
While sometimes an MGA will be licensed with their provincial broker regulator, such as the Registered Insurance Brokers of Ontario, for others, that’s not the case. “It’s a real concern for us,” Rose said. “When we go to look for an MGA, that’s one of the first questions that we ask.”
Relationship also plays into the decision. “I don’t want to take business away from a contract market where I am trying to build a relationship,” she said.
Quick turnaround is another deciding factor, said panel speaker, CJ Nolan, vice president of customer care and growth with St. John’s, Nfld.-headquartered Munn Insurance. “People are looking for turnaround time,” Nolan said. “These are people who are working in their business, so they need it to be quick or, if you are talking about a substandard personal property, it’s still something we have to be able to do something and do it fast in order to compete in that space. Outside of coverage, it comes down to efficiency.”