How to Sell It: D&O Insurance

In a p-c market that is fighting hard to stay above soft, D&O insurance presents unique opportunities for the agent who is interested in a niche that's experiencing firm to hardening rates.

Most independent agents are comfortably familiar with securing management liability insurance for their commercial clients, but D&O for public companies “continues to be an area that becomes more and more technical,” says Tony Komro, management liability underwriter at Beazley Group. “The policies continue to get broader, so at some point there might be a material loss that maybe wasn’t intended to be covered—but is covered due to the broadness of the coverage.”

D&O for private companies and non-profit organizations is a slightly different animal, often sharing characteristics with E&O and EPL coverage—which means success strategies frequently apply across the board but also require agents to maintain an intimate understanding of how each line of coverage works together for each business client.

For example, “something I see a lot related to brokering a D&O risk is the agent not understanding the professional liability exposure,” says Steve Cohen, senior vice president of management liability at Victor O. Schinnerer & Co., Inc. “A lot of brokers come to us rushing to get E&O coverage placed and they don’t know why they’re doing it—they only know it’s a contractual requirement.”

Cohen encourages agents to complete a robust risk identification review for D&O clients, “where you’re 30 or 60 or even 90 days ahead of a renewal and you sit down and sort of refresh your understanding of everything your client does,” he explains. The exercise will help “identify if there are perhaps things they are doing that present a unique exposure that’s not covered. Often, E&O is one of those things that comes up.”

Since management liability coverage can be a fairly broad umbrella, it’s important for agents to focus on “what’s not covered,” Cohen says. “A lot of brokers think that general liability, especially for small companies, might extend to D&O and E&O, but that’s practically never the case. They’ll feel like they’re a better broker if they’re helping their client uncover exposures instead of rushing to put out a fire.”

But the blurred lines between D&O, E&O and EPL can also be confusing for clients or prospects, many of whom “don’t understand the coverage or don’t understand the need for it,” says Stephen Easley, national D&O practice leader for CNA management liability, who cautions against going down a “rabbit hole” of technicalities when explaining D&O coverage.

“Keep it simple,” Easley advises. “Try to make it relatable for them, but stick to the basics as to why they need the coverage.”

That means doing your homework about each business you work with at your agency. “Something agents should really keep an eye on is the financial health of their clients,” Easley suggests. “The financial condition of a company is really a window into what types of quotes they’re going to get from the market, whether it’s a new placement or if it’s a renewal.”

Managing expectations might involve anything from simply preparing clients for potential financial scrutiny from carriers to being proactive in sending financial information with initial submissions in order to save time. “Being up front with clients who are having financial difficulties will be important to an agent’s success,” Easley says.

It’s all part of a strategy that involves striving for something Komro says helps independent agents differentiate themselves to consumers: a “longer-term relationship when thinking about the risk management process.”

Jacquelyn Connelly is IA senior editor.