My first book was entitled Broker Beware, Selling Real Estate within the Law- first published in 1981- even then, Real Estate Brokers had the worst claims frequency of any- and still do-
The problem lies in the nature of their industry- what often makes one successful as a salesperson conflicts head on with one’s obligation(s) as a fiduciary together with disclosure requirements. Further exasperating this conflict is the fact that salespersons are fiercely independent, even to the point of working at a rent-a desk-franchise, yet the Office “Broker” is legally mandated to supervise the Sales agents- a difficult task when revenue is 100% tied to a closed deal. In the 1980s’, one could expect 180 claims per year for every 7500 licensees insured- do the math- it is no surprise that making an underwriting profit has been elusive for most since then.
Fred; Thank you for your post. While I don’t have your statistics, my personal experience handling this coverage backs up what you say. I particularly remember one very aggressive agent who was involved in three separate claims (submitted through two different offices that I covered) in one year. I personally had an unpleasant experience with her (through a third broker) when I was selling a condo of mine, and she failed to disclose to me that the house her buyer was selling was part of a litigious divorce- she was supposed to be representing me! I guess she must have produced, because she kept her job for years.
One other issue that I found was that, since most transactions involve multiple brokers, we would get dragged into situations where the major culprit was not even part of the office we covered. I will say that I think this may be less true with the more common use of buyer’s brokers
Thank you for your comment- I hadled Real Estate E&O Claims for over 20 years before becoming a Wholesale Broker/Provider- As a claims professional, we were able to create some unusual claims resolution settlements that reduced the Loss Ratio’s significantly. I’ll be doing a Specialty Lines Clams Webinar for the IJ’s Academy of Insurance Nov 9… Feel free to tune in as some of my claims experience will be shared- http://www.ijacademy.com/what-to-expect-from-specialty-lines-claims
My first book was entitled Broker Beware, Selling Real Estate within the Law- first published in 1981- even then, Real Estate Brokers had the worst claims frequency of any- and still do-
The problem lies in the nature of their industry- what often makes one successful as a salesperson conflicts head on with one’s obligation(s) as a fiduciary together with disclosure requirements. Further exasperating this conflict is the fact that salespersons are fiercely independent, even to the point of working at a rent-a desk-franchise, yet the Office “Broker” is legally mandated to supervise the Sales agents- a difficult task when revenue is 100% tied to a closed deal. In the 1980s’, one could expect 180 claims per year for every 7500 licensees insured- do the math- it is no surprise that making an underwriting profit has been elusive for most since then.
Fred; Thank you for your post. While I don’t have your statistics, my personal experience handling this coverage backs up what you say. I particularly remember one very aggressive agent who was involved in three separate claims (submitted through two different offices that I covered) in one year. I personally had an unpleasant experience with her (through a third broker) when I was selling a condo of mine, and she failed to disclose to me that the house her buyer was selling was part of a litigious divorce- she was supposed to be representing me! I guess she must have produced, because she kept her job for years.
One other issue that I found was that, since most transactions involve multiple brokers, we would get dragged into situations where the major culprit was not even part of the office we covered. I will say that I think this may be less true with the more common use of buyer’s brokers
Thank you for your comment- I hadled Real Estate E&O Claims for over 20 years before becoming a Wholesale Broker/Provider- As a claims professional, we were able to create some unusual claims resolution settlements that reduced the Loss Ratio’s significantly. I’ll be doing a Specialty Lines Clams Webinar for the IJ’s Academy of Insurance Nov 9… Feel free to tune in as some of my claims experience will be shared- http://www.ijacademy.com/what-to-expect-from-specialty-lines-claims
Fred, interesting stats on claim frequency in the 1980’s. Do you think this has changed in the 2010’s?