As seen in The Standard, New England's Insurance Weekly
The significant growth in the number of professional consultants across the country represents a tremendous opportunity for independent agents who are willing to specialize in this market segment and who are able to provide valued counsel and customized coverage.
Establishing a successful consultancy begins with industry-specific experience and expertise. Consultants with the highest level of their specific industry expertise may not fully understand the risks and exposures of operating an independent consulting business, and also often don't think that claims would happen to them.
That's why many new consultants purchase only the obligatory business owners policy (BOP) or general liability coverage and neglect to protect themselves and their business against professional liability claims — the single greatest risk exposure for an independent consulting business.
Surprisingly, most professional service providers are dangerously unaware of their potential exposure until it's too late. Sadly, many agents also underserve their clients in this respect. Even the simplest error or omission can lead to a lawsuit with potentially disastrous financial consequences. The expense of defending against a professional liability claim can drain financial resources and tarnish a consultant's reputation. Legal judgments and defense costs have doomed many consultancies.
This growing opportunity is being embraced by agents who have taken the time to become informed about this exposure and coverage solutions and who then actively discuss professional liability risks and exposures with their customers and prospects. Guiding their consultant-customers to choose the best coverages to protect their business creates opportunities for agents to differentiate and win more, while filling what is often a big gap in coverage for many businesses.
The market opportunity is large for agents who are prepared to capitalize. As the professional consulting market continues to grow, so do the opportunities for independent agents to grow their business in this attractive sector.
Professional liability claims can result from a variety of "misses" — miscommunication, misunderstanding, misplaced information or misrepresentation of facts. General liability coverage will not protect a consultant against these common types of professional claims, including failure to provide a service, malpractice, professional negligence or mismanagement. When confronted with a potential claim, these businesses face concerns about defense and liability as well as reputation.
Take, for example, a management consultant specializing in maximizing cost efficiencies, who is asked by a manufacturing plant client to reduce waste within its supply chain. If the consultant presents the potential cost savings of $20,000 by eliminating three of the company's suppliers and the plant owner finds that the cost savings, in actuality, is only $2,500, the consultant potentially can be held liable to what the plant owner feels is a misrepresentation of facts. Even if the consultant prevails in court, the business will likely have incurred substantial defense costs. While insurance policies do not insure guaranteed results, they do respond to misrepresentation of results based on the aforementioned claim allegations.
With the growth of data — both online and offline — most consultants are now granted access to a wealth of information from their clients. Whether it is medical records, personally identifiable information or financial information, the risk of that information being misplaced or stolen is very real. For example, a Realtor traveling between showings may lose a laptop containing sensitive financial information of the company's clients. With the right professional liability coverage, the cost for the Realtor to notify clients about the potential data breach is covered.
Agents and brokers are uniquely qualified to provide the expertise and know-how when it comes to the professional liability insurance needs for these business owners. Agents and their consulting clients should not settle for one-size-fits-all insurance protection. Most importantly, consultants need both BOP-type coverages and the right professional liability insurance. To help build business in the consulting segment, independent agents should partner with carriers who have all the ingredients for success. Table stakes include financial strength and confidence that a carrier will be there when it is needed and has proven that it delivers on its promises over the long term. Differentiation happens with the best carriers, which provide their agent partners with deep, industry-specific underwriting and professional liability risk management expertise and offer unique and tailored products, which enable agents to grow in their local markets. For example, the best carriers offer risk assessment and loss management services to help reduce and mitigate these types of risks. In addition, they will offer a full range of coverages — such as management liability, employment practices, surety, commercial crime and marine to address the exposures their clients may face. Finally they bring it together through expert and responsive underwriters, who help agents to provide comprehensive protection and confidence for the independent consultant.
Independent agents can capitalize on the growing professional consultants market, through their industry knowledge and by partnering with the right carriers to solve together the specialized coverage needs of the professional services industry. There is considerable revenue upside potential for agencies today and in the future.
About the author
Greg Leffard is the president of The Hanover's Professional and Healthcare business. As an experienced insurance professional, Greg partners with independent insurance agents and Hanover resources to provide solutions for clients with professional liability coverage and risk management needs.