By Steve Germundson, AAI and Douglas Ruml, CFM

Let's start by telling an agency E&O story: misplaced thrift turned into a tale of woe. We received a request from an agency for a quote on its E&O coverage. As we looked over the submission, we noticed a long list of different carriers the agency had been with over the past few years. Because the list was arranged chronologically, we could see that although the agency secured progressively lower premium by moving their account every year or two, it also ended up with progressively less coverage as the agency settled for policy forms offered by the low-cost carriers. They came to us after submitting a huge claim to their current carrier, who immediately advised them that they would not be renewed. The low cost carrier also dragged out payments, leading to some cash-flow issues.

Now the agency was scrambling and spending a great deal of unproductive time dealing with these problems. The impact on its bottom line was considerably more than what they'd saved over the past decade on cheaper policies. They also ended up damaging their own brand with a large client unhappy at not being serviced properly.