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Demand for miscellaneous professional liability coverage continues to increase as businesses add services and recognize the limits of their other insurance policies, industry experts say.
Litigation, multiple access points to the insurance market and growing awareness of the need for coverage are some of the factors contributing to the uptick.
Businesses should, however, check the definition of professional services in their errors and omissions policies to ensure the type and scope of services they provide is covered, they said.
Over time, the variety of professional services that fall into the miscellaneous category has expanded, driving greater demand for the coverage, said Todd Cusano, Hartford, Connecticut-based senior vice president, professional liability at Ascot Group Ltd.
Diverse service professions are becoming “more aware that they need this coverage, so that they’re not exposed beyond what their general liability may cover or what their businessowners policy may cover,” Mr. Cusano said.
Depending on the market, miscellaneous professional liability programs can cover from 30 to more than 100 classes of business, Mr. Cusano said. These could include advertising professionals, arborists, claims adjusters, composers, consultants, tax preparers and translators.
Coverage for architects and engineers, accountants and lawyers, and other “traditional” professionals is provided on a standalone basis and not part of miscellaneous programs, he said.
Multiple access points are available to brokers, making it easier to obtain miscellaneous professional liability quotes, which is driving growth, said Steve Barbal, national managing director, underwriter for the retail open-brokerage professional lines team in the global specialty division at The Hartford Financial Services Group Inc.
Online quotes are available for lower hazard risks, but for higher-hazard classes that require more in-depth underwriting, such as franchisors, third-party administrators, or trustees, the traditional paper application via a broker may be more appropriate, Mr. Barbal said (see related story).
Brokers and managing general agents are also looking to build out application programming interfaces that will capture miscellaneous professional liability business and potentially quote automatically if it fits within certain criteria, he said.
Businesses are buying miscellaneous E&O coverage in response to rising litigation costs, and the impact of so-called social inflation, or higher awards and settlements, said Rick Grimes, national financial lines practice leader at One80 Intermediaries Inc., the wholesale brokerage unit of Risk Strategies Co., headquartered in Boston.
“Even when meritless claims could be settled for a few thousand dollars in the past, now we’re seeing claims come in two, three, four or five times what historically they could have been settled for,” he said.
Real estate services, such as agents, brokers and property managers, and non-standard consultants including mergers and acquisitions consultants, and elections and voting consultants, are among the harder-to-place risks because of the litigious environment, he said.
An increasing number of service businesses are contractually required to have E&O coverage, which is also boosting demand, Mr. Grimes said.
In the past five years, there’s been an increase in contractual requirements for professional liability coverage, especially in the manufacturing sector, said Nick Kohlhof, a client executive at Holmes Murphy & Associates LLC, a brokerage in Waukee, Iowa.
Underwriting guidelines have also become stricter as insurers target professional liability as a specific exclusion on to general liability policies, “because that’s not what they signed up to cover,” Mr. Kohlhof said.
As a result, demand for miscellaneous E&O coverage among manufacturers has increased, he said.
It’s important to review the definition of professional service within each policy to understand what it is meant to cover and what it is not, Mr. Kohlhof said.
The definition of professional services is less static in MPL than in other industry verticals like architects and engineers and accountants, said Michael Takigawa, head of commercial E&O, Americas, at Axa XL, a unit of Axa SA, who is based in San Francisco.
“In MPL, the definition depends on the underlying risk and can vary from account to account, so it’s much more dynamic in terms of the underwriting process,” Mr. Takigawa said.
From an underwriting standpoint, it is important to ensure the definition of professional services is appropriate, as well as the attendant coverages, whether it is in the base policy form, or an endorsement, he said. “Those all have to be properly articulated and understood in terms of what am I actually covering here,” Mr. Takigawa said.
Marijuana-related risks, whether it is the production, distribution or packaging of marijuana, are typically a very hard placement, he said. And businesses that provide a multitude of complex services, would be less attractive, he said.
The complexity of the risk depends on the industry sector, the service provider, what services are being provided, its revenue size and loss history, and whether it is a consumer-facing business, said Marcia Blanco, San Francisco-based head of financial lines, at Munich Re America Inc.
For example, collection agents that service consumers will come under greater underwriting scrutiny because there’s more propensity for a class action suit than for those working with a commercial vendor, Ms. Blanco said.
“It’s single risk underwriting,” she said.
Online platforms are playing a growing role in the placement process for miscellaneous errors and omissions coverage.
Insurtech managing general agency At-Bay Inc. in August expanded into the miscellaneous professional liability market, adding customized coverage and pricing across more than 50 classes of business via its automated platform. The coverage is backed by Markel Insurtech Underwriters, a Markel Corp. unit.
The focus is on providing wholesale brokers with a customized insurance solution at a fast pace, said Austin Martin, head of professional liability at San Francisco-based At-Bay.
On average, brokers usually need to answer about seven questions per submission via the platform, depending on the applicant, Mr. Martin said. From the start of the process to when they receive a quote is usually a matter of minutes, he said.
In circumstances where a risk needs extra customization, the underwriting team is available to provide support, Mr. Martin said.
For lower hazard miscellaneous professional liability classes such as bookkeepers, marketing consultants, tax preparers and leadership development consultants, brokers can get quotes easily online, said Steve Barbal, national managing director, underwriter for the retail open-brokerage professional lines team in the global specialty division at Hartford Financial Services Group Inc.
Hartford’s online quoting portal enables brokers to log in, plug in some basic information, answer a few questions and in a matter of minutes generate a quote and even bind a policy, Mr. Barbal said.
It also allows them to easily generate quotes for other coverages that a service business might need, such as a management liability, or businessowners policy, he said.