Agents capitalize on soft market opportunities when buying E&O

Jim Armitage of California and Jonathan Geib of Tennessee are among the numerous independent agents who are looking for higher professional liability limits, and why not. Soft market conditions prevail in today’s agent errors and omissions liability market.

Armitage has seen all the market cycles since getting into the business in 1981. “I’ve seen hard markets, soft markets and everything in between,” said Armitage, vice president of multi-lines agency Arroyo Insurance Services, in suburban Los Angeles.

Thus, Armitage and his agency, Arroyo Insurance Services, knew what to do when marketplace conditions turned soft (again) for the first time in several years.

Armitage says he has seen E&O rates turn downward for the first time in several years. His own agency’s rates dropped 10 percent to 15 percent from the previous year, and for at least two good reasons.

“We didn’t have any claims last year and the overall market is softening,” Armitage said.

With rates declining, the agency chose to increase its aggregate limits from $5 million to $8 million and self-insured retentions from $10,000 to $25,000. Arroyo produces $100 million in premium volume.

Armitage’s situation is a little different than that of Jonathan Geib. Geib recently left as a producer for a multi-lines agency in West Virginia to become a principal with Tri-Star Insurance Agency, a smaller firm in Smyrna, Tenn.

Geib says he plans to increase E&O protection because he sees it as a prudent business move. “You increase your auto insurance as you get older because you’ve been accruing assets, and the same principle applies to E&O insurance. I’ve got more to protect with this agency, so we’ll be increasing coverage when the time comes.”

It makes sense for Geib to boost E&O limits. “All the companies we deal with — Viking, Progressive, Sentry and others — require agents to carry E&O,” Geib said.

According to Geib, the non-standard carriers require the agency to carry only $300,000, but the standards require $1 million. “I’m taking no chances. I carry $1 million per occurrence and $2 million aggregate. It’s important that you cover your assets in case of a large E&O claim that you’re not going to be able to immediately pay out,” he said.

Topics Agencies Pricing Trends Market Professional Liability