Going Bare VS Looking For Cover
Does your insurance consultant have proper E&O cover? You may be surprised that is answer may be “no” in some cases.
E&O coverage for insurance agents and brokers can be cheap. For example, an agent may purchase a policy for as little as $500 per year. A review of their Certificate of Coverage could indicate a retention of as little as $500, with limits of $1,000,000. Sounds good, right? But, the policy (a separate document) showing exclusions may be cause for alarm.
Procuring the proper E&O for fee based insurance consulting for self-funded employee health & welfare plans is difficult. Applicants for cover are underwritten as opposed to group E&O plans. And, the premium will run +$3,000 and more per year, much more.
A recent renewal notice from a P&C broker specializing in placement of E&O cover for insurance agents, brokers and consultants outlines the difficulty of procuring the proper cover:
“I did not shop your renewal this year (as of yet). In general I have lots of carriers for insurance brokers & consultants (around 20 altogether), but most of them cannot consider what you do: only a handful write 100% life and/or health (the others prefer P&C sales); and of the few who write 100% L/H, some can’t consider work involving self-funded plans (lots of policies for insurance agent E&O exclude this).”
Plan sponsors who retain a fee based insurance consultant should make sure proper E&O cover is in place. Failure to do so is a breach of fiduciary duties.