Insurance brokers are carrying “borderline absurd” errors and omissions (E&O) limits that will not pay out enough in claims made against brokers, a Manitoba brokerage says.
“There is no doubt that most brokerage firms are underinsured,” Greg Randall, president of Monarch Insurance Brokers Limited, is quoted as saying in a recent edition of Manitoba Insurance Broker.
“The majority of brokers only carry a $1 million limit, which is borderline absurd in this day and age. A simple homeowner’s claim can develop into $1 million in a hurry, never mind a commercially written account that may carry property or casualty limits well in excess of $1 million.”
An Edmonton-based brokerage, Monarch has made a professional liability (E&O) insurance program available for brokers in Alberta since 1982. The program was extended in 2003 and offered to brokers in Manitoba, Saskatchewan, B.C. and the Northwest Territories.
Brokers should not only consider bumping up the primary limit of their E&O policies, Randall said, they should also consider boosting their aggregate limit is as well. Most E&O policies have an aggregate limit, representing the limit of how much an insurance company will pay out in one year. Once these limits are exhausted, no more coverage is available to the broker.
According Randall, broker E&O claims have increased over the past few years, with both the number and dollar value of the claims escalating. Brokers often don’t take into account the investigative and legal costs that drive up the cost of the claims.
“A full 80% of those claims may have been preventable had the brokers in question simply documented their files properly,” Randall said.
He added that brokers will certainly understand the importance of documentation once they have to sit in front of a judge who asks to look at their file. If there is no documentation, there is no defense, and the claim is generally paid out.
