Legal Issues Facing Insurance Agents: How to Protect Yourself
In 1944, the subject of insurance regulation came before the U.S. Supreme Court to help organize insurance companies and ensure proper and fair treatment of consumers. With the passing of the McCarran-Ferguson Act and various others, insurers are now required to follow strict guidelines, as outlined by their state.
To help you understand your rights and responsibilities as an insurance professional, we at InsureMe have identified two important matters facing today's agents: insurance compliance guidelines and personal liability coverage.
Insurance Compliance Guidelines
The state(s) in which you sell insurance will keep major tabs on you—and all other insurance agents selling policies in the state. And, while each state has its own set of rules and guidelines, you are responsible for learning those guidelines and meeting them accordingly.
As an insurance agent, you're responsible for keeping the state informed of some of the following:
- Completion of pre-licensing courses
- License renewals
- Credits earned toward continuing education
- Change or update in address or phone number
It's important to remember that these are general filings to be made with the state—your local Department of Insurance will have state-specific information on what requirements must be fulfilled to legally sell insurance in your area.
Heavy fines are a common punishment for agents who fail to comply with state guidelines—emphasizing the importance to learn and abide by the insurance laws in your state.
Personal Liability Coverage (E&O)
While the government has taken steps to protect the consumer, steps also need to be taken to protect insurers from unscrupulous clients.
Personal liability coverage, more commonly known as errors and omissions coverage (E&O), protects agents from clients who claim the insurer acted improperly on their behalf, which caused the client harm or financial loss.
While formalizing contracts with clients can help limit liability, the major cost in E&O claims is the legal defense needed to prove the insurer's innocence. E&O insurance covers these costs, as well as the final judgment if the insurer does not win.
When it comes to E&O insurance, you should also be aware of the following:
- General business owner's policies do not include professional liability coverage
- Cost and coverage for E&O insurance vary, depending on the agent's size, location, services provided and the business' classification
- Maintaining detailed client records can help reduce the risk of E&O claims
- Lawsuits against insurance agents and brokers are on the rise
There are many companies and risk management firms that specialize in E&O insurance and with the litigiousness of today's society, it's important that you protect yourself and your business from liability damages.
Knowledge is Power!
When it comes to working in accordance to state laws and protecting your business, arming yourself with knowledge is the best course of action. Contact the Department of Insurance in your area for more information on insurance requirements and available protections.
This information was provided by InsureMe, the leader in online insurance leads for the insurance industry. Since 1993, InsureMe has helped thousands of insurance agents succeed in the insurance business by providing top quality leads that are both detailed and affordable. For more information on InsureMe leads, please visit our agent Web site at agent.insureme.com.
