When it comes to agent and broker errors and omissions risks, one area where agents might be missing potential liability concerns their exposure to data breaches, one major surplus lines broker warns.
Kimberly Smith, professional liability underwriter with Burns & Wilcox, explained that too many producers believe that their technology department or consultant can take care of any exposures when it comes to their information program.
However, the truth is that data security can be breached, and agency principals need to consider E&O policies that will cover the risk that client data could be compromised.
Agents and brokers are handling so much sensitive data that they need to seriously consider what would happen if proprietary client information fell into the wrong hands, and what their exposure might be, she said.
"Protecting data is a big concern," she remarked.
A security breach means more than lost data. It can adversely affect an agency's reputation as well as open the firm to liability suits. Producers need E&O protection aimed at restoring that trust, while also covering losses stemming from the incident.
One liability is exposure to a virus that not only affects the agency's systems, but which could spread to the client's systems during an interface, she warned. There is not only a cost associated with cleaning up the agency's system, but also liability to clean or replace a client's infected hardware and software.
Data infection that compromises a system is one issue, but other exposures include lost data, as well as improper disposal of computer equipment.
A computer system that is thrown away without being properly cleansed of information on the hard drive can leave data available to thieves, exposing the agency not only to claims from a client, but also violation of insurance codes and other laws and regulations.
Paper files can be another E&O headache if not properly disposed of. Files should be shredded before disposal to avoid compromising client confidentiality and opening the doors for liability suits, she warned.
Currently, E&O data coverage is a stand-alone product, but Burns & Wilcox is exploring packaging the product with conventional E&O for agents.
"It's a fairly new product, within the past five years, but it is not necessarily talked about much along with other miscellaneous classes," Ms. Smith explained.
Obtaining such coverage, she suggested, is not only good protection for the agency, but can also help agents market the product to other commercial accounts. "It is hard to sell it if you don't see the value in it yourself," she pointed out.
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