The Impact of Client Communication Failures on Errors & Omissions Claims for Insurance Brokers and Agents

Posted on: March 18, 2025 by Huntersure

Clear and effective communication is a cornerstone of the insurance industry. Yet, miscommunication remains a leading cause of errors and omissions for insurance professionals. Even experienced brokers and agents can face costly E&O claims if clients misunderstand policy terms, exclusions, or coverage details. In today’s hard market, where policy changes and exclusions are more common, insurance professionals must be even more diligent in their client interactions.

E&O Claims in Insurance: Causes, Risks, and Realities

Errors & Omissions (E&O) insurance protects insurance professionals from claims alleging negligence, misrepresentation, or failure to provide proper coverage advice. These claims can result in financial losses, legal expenses, and reputational damage. The current hard market exacerbates these risks as higher premiums, reduced capacity, and stricter policy terms lead to more disputes between insureds and their agents.

How the Hard Market Increases E&O Risks

With insurers tightening coverage capacity and raising rates in response to catastrophic losses and social inflation, agents face heightened scrutiny from clients who are struggling with affordability. Industry data reports a $26.9 billion net underwriting loss in 2022, prompting carriers to adjust policy terms, introduce exclusions, and lower coverage limits. Agents who fail to proactively communicate these changes increase their exposure to E&O claims when clients experience coverage gaps.

The most common E&O claims stem from:

• Misrepresentation or misinterpretation of coverage: If an agent provides unclear policy explanations, clients may incorrectly assume coverage for a risk that is actually excluded. When a claim is denied, the agent could face legal action.
• Failure to disclose policy limitations and exclusions: The rise of new exclusions — such as social engineering fraud or wire transfer scams — means clients must be thoroughly informed about what their policy does and does not cover.
• Lack of proper documentation and follow-ups: Failure to document conversations, policy changes, or declined coverages can lead to liability disputes. Written confirmations of all discussions should be a standard practice.
• Missed renewal notices and policy changes: The hard market has led to changes in renewal terms, sometimes with higher premiums or reduced limits. If clients are not properly notified of these changes, they may assume their coverage remains the same, leading to potential lawsuits.
• Failure to accurately assess and communicate coverage needs: Inflation, supply chain issues, and rising property values mean that many insureds need higher limits than before. If an agent fails to explain the risks of inadequate coverage, clients may later claim they were not properly advised.

Best Practices to Mitigate E&O Risks Through Effective Communication

Insurance professionals can take proactive steps to minimize E&O exposure by improving communication practices:

Enhancing Client Education and Transparency

• Use clear, plain-language explanations of policy terms, limits, and exclusions.
• Encourage clients to ask questions and confirm their understanding in writing.

Implementing Strong Documentation Protocols

• Maintain detailed records of conversations, policy recommendations, and client decisions.
• Require written acknowledgments when clients decline recommended coverages.

Utilizing Technology to Improve Communication

• Leverage digital tools such as automated renewal reminders, client portals, and e-signature platforms to ensure transparency.
• Document policy discussions electronically to prevent disputes.

Proactively Managing Market-Driven Challenges

• Offer excess coverage solutions when primary policies have reduced limits.
• Educate clients on rising claim costs and the importance of sufficient coverage despite higher premiums.

Regular Training and Compliance Checks

• Stay updated on industry trends and policy changes to provide accurate guidance.
• Conduct periodic reviews of internal processes to reinforce best practices in client communication and documentation.

Strengthening Client Communication to Minimize E&O Risks

The hard market isn’t ending soon, and insureds are feeling the strain. Proactive client communication is key to reducing E&O claim risks. By improving transparency, documentation, and education, brokers and agents can enhance trust, minimize liability, and protect their businesses from unnecessary claims.

Contact us today to learn how Huntersure can help protect insurance professionals with specialized errors & omissions coverage.

ABOUT HUNTERSURE

Huntersure LLC is a full-service Managing General Agency that has provided insurance program administration for professional liability products to our partners across the United States since 2007. We specialize in providing insurance solutions for businesses of all sizes. Our program features can cover small firms (grossing $2.5 million annually) to large corporations (grossing $25 million annually or more). We make doing business with us easy with our breadth and depth of knowledge of E&O insurance, our proprietary underwriting system that allows for responsive quoting, binding, and policy issuance, and tailored products to meet the needs of your insureds. Give us a call at (855) 585-6255 to learn more.

Posted in: E & O E & O Insurance Errors & Omissions Insurance

Tagged: errors and omissions for insurance professionals