Professional Liability Insurance: Broker vs Direct

Comparing Apples to Oranges

Lawyers, accountants, financial professionals, technology experts, and other professionals understand that in today’s litigious environment, professional liability insurance provides a necessary component for any risk management strategy. Even groundless claims can cost thousands of dollars to defend. When you are ready to purchase your professional liability coverage, you have the option of purchasing your coverage directly from an insurance company (direct writer) or working with an independent insurance broker. Which is the better choice?

An insurance company that is a direct writer has employees who sell and service your policy solely on that insurer's behalf. In comparison, an independent insurance broker offers you access to a variety of professional liability insurance companies. You can easily compare coverage and premium options from multiple insurance companies from one source.

Contrary to some popular thinking, it doesn't cost more to purchase an insurance policy just because a broker is involved. You don't ever pay the broker's commission, the insurance company does.

Specialized Insurance Brokers Represent Your Interests

Your independent insurance broker does not work for the insurance company, but functions independently as an advocate for your business in the insurance marketplace. A good broker can assist you in completing the applications and expertly represent you to the underwriters that the broker has  established relationships with. This puts you in the position to receive the professional liability insurance you need, at the best rate and coverage terms.

Once you obtain the coverage, the broker continues to act as an intermediary between you and the insurance company to assist you with any midterm servicing requests including claim reporting. You will have access to invaluable expertise and professional advice throughout the year--not just at renewal. Think of your specialized insurance broker as an extension of your business. A trusted expert who is there to assist with your questions and concerns before, during and after the sale. A specialized broker will provide advice on the most optimal approach to the management of your professional liability insurance risk.

Your Time Is Money

When you purchase insurance coverage through a company that is a direct writer, you must invest a significant amount of time in the process, including:

  • Completing the myriad of confusing application questions
  • Interacting with the insurance company to resolve additional information requests
  • Following up to receive the needed quotes
  • Decipher the jargon
  • Analyze the coverage and do your own marketplace comparisons

When it comes time for renewal, you may have to repeat the process to ensure that you receive the most coverage possible at the best premium. An independent insurance broker offers one-stop shopping and does the necessary due diligence. This type of business relationship frees up more time for you to spend on your core business operations and increase your revenues and profits.

All Professional Liability Policies Are Not Created Equal

Generally, professional liability insurance provides coverage for actual or alleged errors, omissions and/or negligence from the performance/non-performance of your professional services. However, these policies are not standardized and can vary greatly in coverage provided.

For example, some policies may, or may not, cover the cost to defend you in an administrative or disciplinary action by a regulatory agency. Other policies may not provide any compensation for your expenses and loss of income should you need to take time away from your business or practice to attend a hearing or trial. In addition, some policies require an actual lawsuit or demand to trigger coverage, while others are also triggered with the presentation of a circumstance or facts that could result in a claim. You can also understand that direct writers are less likely to objectively point out their own coverage shortcomings.

In the End

When you consider that it does not cost you any more money to work with an independent insurance broker who specializes in professional liability insurance and represents your interest at all times, the choice is clear. An independent insurance broker can deliver more coverage choices and provide better customer satisfaction.

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Cindy Wiedman

Cindy is a Registered Professional Liability Underwriter (RPLU) and has designed and administered professional liability insurance programs over a 35 year career. She has worked with many affinity groups over that time, and specializes in Lawyers Professional Liability Insurance. She has served members of the Iowa State Bar Association with their liability Insurance needs since 1986, first for Kirke Van Orsdel, then Marsh Affinity and most recently Lockton Affinity.