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Policies When it comes to the policies... Let's answer these one after the other. Brokers' needs In short, these are the concerns and needs of E&S brokers: Surplus lines brokers' needs First of all, a surplus lines broker needs something to sell. In part that means having enough information to take to market. And at the end of the sale, the broker needs a completed application that actually has all of the boxes filled in along with any required additional questionnaires answered and signed by the insured. Another thing valued by surplus lines brokers is a recurring and ongoing relationship with an ethical broker providing a decent supply of insureds. And let's not forget that ever-so-important need: a profit. The insurer's needs Of course, one concern for the insurer is that there are no losses; or if there are losses, that there are good explanations that accompany them. The insurer also needs a reason to use their surplus to write the risk. An insurer relies on having proper risk information in order to underwrite E&S policies. This is particularly important in the E&S marketplace, because the carrier does not know the insured and many times a non-admitted market may not even know the area. Who would want to guess and jeopardize his/her job? Knowledge is the key when underwriting E&S policies. The insured's needs Though they are after alternative insurance, the price still has to be reasonable. It wouldn't help if the E&S policy itself makes them go bankrupt. The insured also needs a broker to explain in very clear terms the marketplace and coverages to them. They would want their broker to explain how to purchase insurance to suit their specific needs. Can the broker point out coverage that the insured is obligated by contract to purchase? Can the broker point out coverage that will respond to a possible or probable catastrophic loss? Security The need for security is critical when dealing with E&S coverage. It might be important to know what E&O limits the broker carries, depending on the circumstances. Typically in an E&O situation, the Excess and Surplus lines broker is the first to be dismissed from the case as they are only acting in the capacity of a placer. However, it is important that they are financially responsible for whatever defense they do have to provide and that the deductible does not put financial hardship on them. Contract requirements are another key issue. "Hold harmless" and indemnification agreements may be in the contract that you have signed with the broker. Read these carefully to make sure you are not assuming their negligence. You want to make sure that their E&O insurance is in place and able to defend. See if you can you get a copy of their E&O declarations page? It's a good idea to check the carrier ratings. There are various companies who rate the insurance carriers. The most familiar of these include: AM Best provides two ratings: Standard & Poor's evaluates the claim paying ability of more than 400 companies. According to a study by the US General Accounting Office (GAO), Weiss' insurance ratings seemed to be more accurate than those from any of the other rating agencies. Does your E&S broker review the carrier ratings with you? This is something to consider. The biggest potential E&O exposure is between quoting, acceptance, binding, and then the actual policy issuance. The surplus lines broker should be able to provide you with a copy of the insurance contract that has been ordered. |
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Not only are policy forms, clauses, rules and court decisions constantly changing, but forms vary from company to company and state to state. This material is intended as a general guideline and might not apply to a specific situation. The authors, LunchTimeCE, Inc., CEfreedom, and Insurance Skills Center, and any organization for whom this course is administered will have neither liability nor responsibility to any person or entity with respect to any loss or damage alleged to be caused directly or indirectly as a result of information contained in this course.
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