2008 Insurance Journal Agency E&O Survey at a Glance

The 2008 Insurance Journal Agency E&O Survey, conducted Oct. 3 through Oct. 16, drew 1,042 respondents from 50 states; there were no respondents from the District of Columbia. The five states with the highest percentages of respondents were California (19.3 percent), Texas (10.4 percent), Florida (7.9 percent), New York (6.5 percent) and Illinois (5.1 percent).

Of the agents/agencies responding to the survey, 74.5 percent conduct business in one to five states; 11 percent do business in most states. The majority — 66.1 percent — have one to 10 employees and 44.9 percent of respondents said their agencies had been in business for more than 30 years.

Total property/casualty premium volume in 2007 was less than $5 million for 52.4 percent of responding agencies; 17.3 percent said their agency’s P/C premium volume ranged between $5 million and $10 million; and 13.3 percent had P/C premium volume between $11 million and $25 million. Only 3 percent responded that their premium volume was more than $200 million in 2007.

All of the respondents handled some combination of commercial and personal lines, with commercial lines slightly edging out personal lines in percentage of total premium volume. For around two-thirds of the respondents, employee benefits accounted for at least some percentage of their agency’s total premium volume.

Slightly more than half of the respondents — 56.6 percent — said their agency revenues increased in 2007 over 2006; 27.6 percent said revenues decreased and 15.8 said revenues stayed the same in 2007 relative to 2006.

Of those responding, 44.1 percent said their E&O premium for 2008 increased compared with that for 2007; 26.3 percent said their premium decreased and 29.7 percent said their E&O premium stayed the same.

For the majority of survey respondents, their annual E&O premiums run between $1,001 and $10,000: 16 percent said their cost of coverage was in the $1,001 to $2,500 range; 27 percent of respondents pay between $2,501 and $5,000 for their E&O policy; and 18.2 percent had premiums of $5,001 to $10,000. For 10.1 percent of respondents, the cost for their annual E&O coverage is more than $50,000 per year.

For 2009, 43.1 percent of respondents believe their E&O premiums will remain flat; another 40.7 percent think they are likely to see an increase in premium costs next year; 16.2 percent are optimistic that their premiums will decrease in 2009.

Most (68.6 percent) reported having been with the same E&O carrier for the past three years. For those reporting that they had changed carriers in the last three years, 27.3 percent said a lower price was the reason for the switch.

More than half of respondents (55.7 percent) said their carriers had not enacted stricter underwriting requirements and exclusions during the last two years. While 57.6 percent said they were satisfied with the terms, conditions and limits of their E&O policy, 14.9 percent said they were dissatisfied. Another 27.6 percent reported they were “somewhat” satisfied.

The majority of respondents, 54.3 percent, have never made a claim against their E&O policy. Another 56.1 percent believe other insurance agencies take E&O risk management seriously; and 58.4 percent said their agencies had taken new risk management steps during the past year to reduce exposure to E&O claims.

Topics Trends Agencies Property Casualty