E & O Cost

Discussion in 'E&O - Errors and Omissions for Insurance Agents' started by cap361, May 4, 2016.

  1. cap361
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    cap361 Active Member

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    How is an E & O calculated? Is it by volume of business? Does it cost more for new agents? Will they even write a policy for me?

    I'm buying the book from another agent and they will be staying on with me until I'm ready to be on my own. Thanks in advance.
     
  2. OldIA
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    OldIA Member

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    E&O was one of my biggest issues when I opened my independent agency. I did get a standard rate by going through Independent Insurance Agents of Virginia because of my experience, but the underwriters kind of vaguely let me know they felt like they were taking a chance, watching closely. I was told that most new independent agencies start with a high risk type of E&O that is closer to $2500 and that was about what my quotes were outside of IIAV. Mine cost just under a $1000 a year. Each renewal for four years felt something like an IRS audit and took me a couple of months to prepare for. This was one of the biggest headaches, hassles, and nerve wracking parts of owning my agency. If I do it again, I'm sticking with only a couple of companies since the E&O renewal process wanted detailed information from each company I was doing business with.

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    I think if you are captive, some companies help with E&O. Yes my volume did have an impact, but not much. The premium started increasing towards the end of my adventure before I sold my book. The rate was mostly calculated by 'standard' or 'non standard.'

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    You can also buy a cheaper coverage with hardly any underwriting for about $500 a year, but it only covers defense costs if you are under an E&O investigation or charge. If you lose the case, you are on your own to pay the damages!

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    One more thing, I believe the premium and underwriting had to do with the lines of business you are writing too. I was trying to write everyone that walked in the door or called me, so my venture included some odd paths at times - commercial, health, personal lines, life, etc. That is another aspect I will change if I do it again - streamline my focus and only use surplus lines on very rare occasions.
     
  3. cap361
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    cap361 Active Member

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    Thanks for the info. I appreciate it.
     

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