The transition of the independent insurance agent from salesperson to financial consultant, largely fueled by the advent of the Affordable Care Act, has caused errors and omissions liabilities for producers to skyrocket in recent months.
However, while National Association of Professional Agents founder Lou Marinaccio believes the producer community is well aware of most of their E&O exposure, there is one area that still concerns him.
“I think we are dramatically aware of our [E&O] liabilities,” said Marinaccio, who also works as CEO of MGA Insurance Group. “I think that the potential of being sued has been drilled into us, with one exception—the security breach.”
Marinaccio said that as of the past three to six months, MGA is encouraging its agents to buy breach of security coverage with their E&O policies. The reason?
“Unfortunately, it’s because of the technology that’s out there that can be pirated,” he said. “Almost all agents today work in a worksite environment where they collect information on laptops and use pre-filled applications. There are various viruses out there to contaminate that data, and various situations where people pirate that data in the form of a transmission.”
Marinaccio noted that many independent agencies “don’t have the most sophisticated backup systems” and work off basic software provided by carriers, which often doesn’t have cyber safeguards in place.
Even incidents as simple as leaving a laptop unguarded can increase E&O occurrences in a worksite environment, Marinaccio said.
“We had a situation where the independent agent completed the enrollment, got up to go to the bathroom, left the laptop, and when she came back, she found that her computer had been violated and data had been taken from it,” he said.
The solution is breach of security coverage in an agent’s E&O policy.
While breach of security coverage is already included in many agent E&O policies, Marinaccio noted that policy language does not specifically outline what types of breaches the coverage will respond to, or what damages it will pay.
“NAPA and MGA has specifically put our carriers on notice that we want this benefit to be specifically spelled out,” he said.