Wholesale agents are missing a huge opportunity by failing toproperly market a wide range of professional liability coveragesvia their retail agent network, one leading insurer contends.

The comments came during a seminar on professional liabilityhere during the 80th annual meeting of the American Association ofManaging General Agents.

David S. Charlton, executive vice president for United StatesLiability Insurance Group in Wayne, Pa.–a member of BerkshireHathaway–shared some of his insights into marketing and judging theadequacy of coverage for professional liability prospects.

Mr. Charlton's main message to the wholesale brokers and MGAsassembled here was that they are overlooking a growing marketbecause they are not actively promoting the need for such coveragevia their retailers to small and midsized policyholders.

Some wholesalers try to tag professional liability onto ageneral liability policy, but too often if the retail agent askswhat the coverage is or why it is needed, the wholesaler does nothave a satisfactory answer, according to Mr. Charlton.

“The retailer does not understand what this [coverage] is for,and it would be helpful for the wholesaler to load their lips,”said Mr. Charlton. “Too often wholesalers are trying to sellprofessional liability, but are not marketing it. It is not enoughto just put it on a policy and hope it is purchased.”

Wholesale brokers need to overcome the anxiety agents may feelnot to “look dumb in front of their clients,” and educate them ontheir clients' needs and how professional liability fills a void incoverage.

Up until the 1990s, he explained, a standard commercialliability policy covered professional liability claims. However,the development of exclusions eliminated such standard coverage,making it necessary by 1992 for insurers to develop a separate lineto fill the gap.

The fact that there is a void in coverage, according to Mr.Charlton, is often not being communicated to retailers–and,ultimately, to policyholders.

At one time, the coverage was prohibitively expensive, making itunaffordable for many small and midsized risks, but technology andbetter underwriting have lowered the cost, he said.

Mr. Charlton said lowered rates and the potential for defensecosts running into the tens of thousands or more if an insured ishit with an employment practices liability suit, for instance, makethe need for such coverage not only affordable but necessary.

As for the size of the market, he reviewed a number ofstatistics from different studies that indicate few small andmidsized businesses and nonprofit organizations have purchasedEPLI, directors and officers, or errors and omissions coverage.

Increased litigation over discrimination for age or sex, orsexual harassment increases the need for EPL coverage, said Mr.Charlton. He also cautioned about the potential exposure of anindividual's personal assets if there is no D&O coverage forboard members in a private company.

Mr. Charlton mentioned the exposure of a consultant who lacksE&O coverage and faces defense costs should a client feel theconsultant has not lived up to what was marketed. He cited otherexamples where small and midsized accounts lacking risk managementskills on such exposures need risk transfer.

Technology risks are one area where there is booming potentialfor professional liability coverage, noted Mr. Charlton. Exposuresinclude copyright infringement, inadvertent transmission of avirus, or mishandling of personal information.

Another growth area for brokers he cited is real estaterisks–specifically E&O and property manager professionalliability. The growth of condo and homeowner associations alsopresents a great opportunity for brokers, he added.

To ultimately be successful with this product, wholesale brokersneed to present themselves to retail agents as specialists in themarket, willing to review a policyholder's coverage, find the gapsand provide the solution. The wholesale broker should also seek tocross-sell with other liability writings, he said.

“Be able to say to your retail agents: 'Let me be your outsourcefor this. Don't just rely upon me when you need it,'” Mr. Charltonsaid.