Hanover study affirms need for E&O insurance
Over two years, half of professional service providers faced allegations of non-performance and were denied payment.
Professional service providers are no stranger to customer scrutiny. In careers like accounting, nursing and other health services, these professionals face unique risks to their finances with threats of withheld payments or allegations of non-performance by unsatisfied customers.
In a recent study from The Hanover Insurance Group, researchers found that nearly half of professional service providers faced allegations of non-performance by customers in the last two years.
This finding, The Hanover says, underscores the need for professional liability insurance, also known as errors and omissions (E&O) insurance.
The group’s Professional Liability Risk Report was published as part of the Hanover Specialty Research Series, a series intended to deliver valuable insights into evolving risks, emerging exposures and industry trends.
Produced in partnership with Zogby Analytics, The Hanover says its report examines the “exposures, motivations and actions” E&O insurance customers, as well as non-customers, to help agents better understand and meet the needs of both buyers and non-buyers.
Who’s buying E&O?
The report found that 1 in 5 professional service providers do not have E&O insurance, despite 44% of workers reporting having had customers withhold payments due to contract disputes.
In examining who’s buying E&O — and who is not — researchers found that 52% of this professional demographic do review insurance company websites for E&O policies, which is also typically their first step in the process.
Another 42% complete online searches, while just 36% sought advice from associations, further indicating customers are learning about and purchasing E&O insurance mostly on their own.
In choosing a policy, the majority of customers look to review a number of options. According to the report, 1 in 3 purchasers get 4 or more quotes during the policy shopping process, and 8 in 10 prospective customers request quotes from specific insurance companies.
Leveraging shopping data
When it comes down to selecting a policy, survey data shows buyers rated coverage as the most important factor in their decision-making process. Price does play some factor, however, but mostly at renewal when faced with a rate increase.
As a result, nearly half of E&O customers reported changing insurance agents in the past three years, and more than 40% reported changing insurance carriers, making renewals even more challenging for agents.
Sarah Medina, president of professional liability at The Hanover, says the best way independent agents can serve their clients and foster loyalty is by recognizing that relationships will be tested with each renewal.
“Partnering with carriers can enable agents to best understand the offerings, and provide solutions that meet high customer expectations,” Medina writes in the report. “Those agents who understand their carriers’ options and refine their consultative approach to include several quotes will succeed with this business.”
The full Professional Liability Risk Report can be found on The Hanover’s website.
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