Hanover Specialty Research Series
Professional Liability Risk Report
Independent agents can address unique professional service needs
Professional service providers such as accountants, consultants, nurses, engineers and physical therapists operate in a complex and ever-changing risk environment. They face significant scrutiny over their performance, and a substantial number experience withheld payments or allegations of non-performance when services rendered do not meet customer expectations.
Developed in partnership with Zogby Analytics, our Professional Liability Risk Report delves into the exposures, motivations and actions of those who have bought professional liability insurance—also referred to as errors and omissions (E&O) insurance—to address their risk, and those who have not.
This report highlights the different approaches independent agents can take to meet the unique needs of both buyers and non-buyers.
Professional service providers are aware that, given the nature of their services and their experience with allegations of non-performance from customers, they consistently face professional liability exposures.
operate in fields where professionals are required to have a license
1 in 5
professional service providers do not have E&O insurance
had customers withhold payments due to contract disputes
identify coverage as the most important factor when contemplating purchasing E&O insurance, ranking it above price
Yet they do not consistently purchase E&O insurance. Independent agents can best serve these clients by understanding the motivations and actions of both buyers and non-buyers.
In today’s litigious business environment, compromising on E&O coverage can have long-term impacts. Unhappy customers can withhold payments, costing companies needed operating income, while liability lawsuits expose companies to enormous costs, jeopardizing profitability and reputation. While most providers recognize they need this coverage, independent agents can deliver real value in helping these clients understand just how much they have at risk.
- Greg Leffard, President, Professional and Executive Lines
Buyers of E&O insurance
Our research shows buyers recognize the need for E&O protection. They also understand they often do not have all the relevant information to make well-informed decisions on their own, in terms of what to buy and from which carrier to purchase.
As a result, a high number of buyers begin the process on their own by performing thorough research and due diligence, as they work to become informed consumers.
review insurance company websites
complete online searches
seek advice from associations
But, while they gather information on their own, most buyers recognize they still need to seek guidance from experts. As a result, 60% of buyers turn to independent agents for advice.
Buyers want options
As buyers become more informed consumers, they expect multiple choices when evaluating their options. An overwhelming majority of those surveyed reported that they leverage the knowledge gained in their research to specifically request multiple quotes for consideration.
purchasers get 4 or more quotes during the process
request quotes from specific insurance companies
The more informed buyers are, the more they will approach the coverage conversation with judgments and ideas based on what they have already learned. To avoid scrutiny, independent agents will want to hone their pitch to effectively speak to this sophisticated consumer group. This, in turn, presents independent agents an opportunity to truly showcase their expertise, earn trust and build the foundation for a successful relationship.
Purchase does not equal loyalty
Our survey showed that buyers rated coverage as the most important factor in their decision-making process. However, price still plays a factor in their decision-making, especially when faced with a rate increase.
As a result, nearly half of of buyers reported changing insurance agents in the past three years, and more than 40% reported changing insurance carriers.
With the knowledge that a large premium increase is the top motivation for a change of insurance, independent agents can anticipate this objection and proactively address the topic before it becomes an issue.
Additionally, agents can also focus on the factors that professional service providers say keep them loyal and happy. This includes a high level of service, with excellent communication and transparency throughout the insurance lifecycle.
Independent agents can best serve their clients—and foster loyalty—by recognizing that relationships will be tested with each renewal. Partnering with carriers can enable agents to best understand the offerings, and provide solutions that meet high customer expectations. Those agents who understand their carriers’ options and refine their consultative approach to include several quotes will succeed with this business.
- Sarah Medina, President, Professional Liability
Non-buyers of E&O insurance
Our survey revealed that professional service providers face significant professional liability exposure as a result of the services they perform—regardless of whether or not they have E&O insurance.
perform at least some consulting work, training or provide advice to customers
design, recommend, install or test products
Lack of protection, lack of prevention
In addition to not purchasing insurance to address their exposure, non-buyers do not consistently adopt risk mitigation policies and procedures that can help prevent losses.
do not use second-person/partner review of work output
do not use disengagement letters for terminating clients
do not use client screening procedures
do not use contracts or engagement letters
When, not if
Our report revealed that in the past two years, a significant number of non-buyers experienced an incident that could negatively impact their business.
Without E&O insurance in place, the cost of legal fees and settlements, as well as lost income from clients withholding payments, can erode profitability and threaten the viability of the business.
Converting non-buyers into buyers
Our report revealed that price isn’t the issue. Instead, a lack of coverage is the result of a lack of awareness, consideration or follow through. In fact, one in five non-buyers intended to buy E&O insurance, but simply got sidetracked and did not complete the purchase.
Top reasons for not having E&O insurance
For independent agents, this means that there are minimal price-based obstacles to overcome in attempting to convert non-buyers to buyers. Instead, it’s often a matter of agents getting their clients to focus on thinking about and completing their purchase.
That will allow agents to exhibit their expertise on businesses that were not aware of, or had not contemplated, E&O insurance, by advising them on the critical need for this coverage, given their exposure and the high likelihood for loss.
Unfortunately, for a lot of professional service providers, a lack of E&O insurance and poor risk mitigation practices tend to go hand-in-hand. Together, this increases the chances that they’ll face a costly loss—the exact kind that E&O is designed to protect them from. Independent agents can play a vital role in breaking this cycle, by removing the mental or logistical hurdles standing between their client and the protection they need.
- Eric Paynter, President, Healthcare
About this report
Zogby Analytics conducted an online survey of business decisions makers nationwide. In the survey, business decision makers were asked about how they protect their businesses from errors and omissions (E&O) exposures and what they take into consideration when thinking about E&O insurance. The Hanover was not identified as a participant or sponsor of the survey.
About The Hanover
The Hanover is a leading property and casualty insurance company offering a broad portfolio of tailored coverage solutions for personal, commercial and specialty customers. The Hanover is a Fortune 1000® company, with nationally recognized claims service and proactive risk management expertise. The company's financial strength has earned it high marks from key industry analysts, including an "A" rating (Excellent) by A.M. Best Company.
About Zogby Analytics
Zogby Analytics is respected nationally and internationally for its opinion research capabilities. Since 1984, Zogby has empowered clients with powerful information and knowledge critical for making informed strategic decisions.
The firm conducts multi-phased opinion research engagements for banking and financial services institutions, insurance companies, hospitals and medical centers, retailers and developers, religious institutions, cultural organizations, colleges and universities, IT companies and federal agencies. Zogby's dedication and commitment to excellence and accuracy are reflected in its state-of-the-art opinion research capabilities and objective analysis and consultation.
Emily P. Trevallion
Abby M. Clark