NU Online News Service, May 13, 2:45 p.m. EDT
The sale of professional liability insurance has increased dramatically in recent years. Up to 500 percent at some agencies, members of an agency cluster said.
Austin, Texas-based Combined Agents of America, LLC, a 44 member independent agency managing general agency cluster located throughout Texas, Oklahoma and Kansas, said its members have seen dramatically increased demand from their clients for errors and omissions, directors and officers, and employment practices liability insurance coverage.
CAA said many agency owners expect the growth to continue and predict a rise in these kinds of claims because of the number of failing businesses in 2009 and continuing layoffs.
CAA said one member agency, Duncan Fraser & Bridges Insurance in Pampa, Texas, said the number of errors and omissions policies sold grew 167 percent from 2008 to 2009. During that same period directors and officers liability insurance grew 20 percent. CAA added that the agency is already only a few policies shy of matching its numbers from last year.
Another member, Cravens Warren Insurance in Houston, Texas, said D&O policies grew 32 percent between 2007 and 2009 and employment practices liability insurance policies sold grew 560 percent during that period.
More evidence of demand could be found at Mims & Smith in Midland, Texas. The agency said the number of executive policy packages, which include D&O, E&O, EPLI and crime policies, grew 160 percent between 2008 and 2009.
BRIA Insurance & Risk Consultants in Austin, Texas, said D&O policies sold grew by close to 30 percent between 2008 and 2009, and 45 percent from 2007 to 2009. EPLI policies sold grew by close to 43 percent between 2007 and 2009.
At Purifoy & Co. Insurance in Temple, Texas, reported that the number of D&O policies sold between 2008 and 2009 grew 13 percent, but jumped by 70 percent between 2007 and 2009.
Finally, in a one year period, 2008 to 2009, Bryan Insurance in Graham, Texas, E&O policies grew 500 percent, while EPLI sold between 2007 and 2009, grew 500 percent.
Bill Russell, chief executive officer of BRIA Insurance said in a statement that when private sector companies begin to fail lenders, investors and suppliers tend to file D&O claims against the company's leadership "for a failure of duty, or alleged wrongdoing in making decisions that cripple the organization."
As workers get laid-off, employees may file wrongful termination claims to overcome their financial losses.
In an interview, Mr. Russell explained that there is a combination of forces driving the purchase of professional liability coverage. He said well publicized business failures have placed potential exposures in the minds of executives. Increased education and awareness has helped, adding that executives are savvier today and good risk management practices help.
He also credited agents with being more knowledgeable and educated about the coverage.
Over the years, professional liability has become more affordable, he pointed out, and it also helps that the coverage is being sold in packages instead of individually.
With the continued soft market, agents are also seeking to round out their books of business, and professional liability is one way of doing that. Capacity is not an issue, as more insurers are offering the coverage, he noted.
"There are a lot of things driving the purchase of this coverage now I think," said Mr. Russell.
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