As seen in Property Casualty 360
According to a recent report by Forbes Insights and The Hanover, while 40% of small business owners believe they face professional risks, most do not purchase miscellaneous professional liability insurance along with their business owner's policy or commercial package policy.
There have been significant changes in the ways small businesses interact with customers over the last 15 years — from a burgeoning "consulting" class to the birth and explosion of social media.
However, many small businesses have not made corresponding changes to their insurance policies to reflect these risks, often because they mistakenly believe their general liability policies also cover them for risks associated with providing professional services. This gap in coverage presents a great opportunity for agents to offer valued counsel to their clients.
Helping customers assess their risks
Whether your client is a wedding planner, a real estate agent, a software developer or a financial consultant, a wide range of small businesses would benefit from coverage beyond what is offered in a standard general liability policy. But many business owners are not aware of their potential coverage gaps — and the costs they could incur if faced with a lawsuit.
Helping small business owners understand their vulnerabilities is a great first step. Professional liability coverage can be especially important if small businesses have customers allege non-performance of their products or services, or withhold payment due to a contract dispute. Additionally, it can be very beneficial for small businesses that encounter any of the following circumstances:
- Performing consulting work, training or other services for their customers.
- Involvement in work requiring special licenses.
- Designing, recommending, installing or testing products.
The importance of the right carrier
While it is important to make sure clients have the right miscellaneous professional liability protection, we are seeing top agents also assessing the carriers they use to provide this coverage. With an increasing number of small businesses requiring professional liability protection and more and more agents focusing on this opportunity, agents are being very selective about coverage options and carriers, only working with companies they believe have:
||1. Customer service centers that provide servicing for professional lines business. With many carriers only offering service for standard lines in their customer service centers, it is a good idea to consider if a carrier can manage specialized coverages, as well. Placing professional liability lines in service centers, in addition to standard lines, offers both agents and small business clients the most seamless service experience.
||2. Online solutions. Carriers that have online quoting capabilities, including endorsements that can be packaged with business owner's policies, can offer a seamless solution for clients while improving the ease of doing business for agents.
||3. Experienced underwriters and claims teams. A wide variety of professionals rely on this coverage, so it is not always a one size fits all solution. Partnering with carriers that have experienced underwriters and claims professionals can be an important value-add for agencies, offering expert guidance on nuances of the policies and potential professional services risks for small businesses.
||4. The right coverage options and flexibility. Agents know today's small business could quickly become a big business. Partnering with carriers that offer both endorsement and stand-alone options for professional liability enables agents to offer the level of protection their customers need. Whether a client needs specialized coverages or standard limits, endorsements or standalone options, partnering with the right carriers well positions agents to be able to easily offer long-term solutions for their small business clients as their businesses grow and change.
Helping small business owners understand the tremendous need for miscellaneous professional liability coverage is a win-win for independent agents. By offering important and valued counsel, agents can guide their clients to protection that helps ensure the continuation and sustainability of their businesses, while reinforcing the agency's value.
To learn more about professional liability risks and other risks facing small businesses, check out the 2018 Small Business Risk Report from Forbes Insights and The Hanover.
About the author
Chip Hamann serves as The Hanover's Small Commercial chief underwriting officer. In this role, he leads a team responsible for determining the underwriting strategy, state management, product and point of sale offerings. He also oversees the field underwriting teams. He and his team partner with actuarial, product, technology, corporate underwriting and marketing to continually assess and evolve The Hanover's underwriting strategy and best practices to help position The Hanover as a carrier of choice for agents in Small Commercial.
This material contains suggested guidance and is provided for informational purposes only. It does not guarantee any particular outcome and is not intended as an endorsement of any of the entities mentioned therein.