New E&O course could help reduce rates

By Martin Beaudry | May 20 2003 04:02PM

Troubles in the errors and omissions insurance (E&O) market are now nation-wide as Quebec brokers were hit with rate hikes that mirror a continuing trend in the rest of Canada. In fact, the rising rates led Peel Institute to propose a course that may help slow down the increases for brokers who take the course.

A five-hour course was created to educate brokers on the workings of E&O policies and to suggest best practices to avoid claims, says Jim Bullock, Registrar at the Peel Institute.

Mr. Bullock says one insurer has already agreed to give special consideration to course graduates either through discounts or extent of coverage. The unnamed insurer has also said it may even make taking the E&O course mandatory. Mr. Bullock says he expects the insurer’s discount for those taking the course will be around 25%.

The course is structured to teach how to reduce exposure to non-insured activities and reduce risk from insured activities. It will be accessible through seminars, symposia, or online.

Quebec, which had seemed insulated from the hard E&O market, is now feeling the pain as well. Insurers are few and far between, and rates have begun to rise. Some have even reported rate hikes in excess of 600%.

Pierre Paul Dagenais, Underwriter at Elliot Special Risks in Montreal, says prices are up an average 25% to 30%. He claims insurers are increasing severity within their coverage, but hastens to note there is still capacity in the market.

When Encon left the market last year it abandoned some 20% of the market, including group E&O coverage for both the Independent Financial Brokers of Canada (IFBC) and Equinox Financial Group. The Encon-insured group at Equinox numbered 1000.

That is just two thirds of the total representatives, according to Phil Booth, Senior Vice-President for Administration and Technology at Equinox. The other third had switched to Innovesco after Encon imposed rate hikes last year. In fact, says Mr. Booth, that proverbial foot-in-the-door may have allowed the remaining members to switch over as well.

The switchover led to a 100% rate increase, but in the current market, members are happy nonetheless, says Mr. Booth.

ERC renewed its E&O group coverage for Advocis members who had signed on when the Canadian Association of Insurance and Financial Advisors (CAIFA) was independent of the Canadian Association of Financial Planners (CAFP). Average rates increased 20%.

Those who signed on with the London Guarantee-insured CAFP plan had their coverage renewed in October last year. Past President Terry Taylor anticipates no trouble renewing the plan. He is now COO and CEO for Standards at Advocis.