Preventing E&O Exposures as Insurance Agencies Turn to AI

• By: Olivia Overman
• November 17, 2025

Forty-one percent of independent agents reported they are planning to adopt artificial intelligence (AI) for their business within the next six months, according to “Actionable AI: A Guide for Insurance Agents” from Nationwide. Yet only 17% of agents said they trust AI technology, and 27% view AI as a threat, according to Liberty Mutual’s Agent for the Future “2024 Agent-Customer Connection Study.”

The rise of AI is poised to transform independent insurance agencies that utilize or are developing their own proprietary tools. However, increased adoption is prompting essential discussion regarding the errors & omissions implications of its use by agencies.

“AI is new, it’s obviously still developing, and we’re in the very early days of how it’s going to be implemented across businesses around the world,” says Ron Kiefer, area executive vice president, Risk Placement Services (RPS). “It’s pretty important that in these early days of AI that there is oversight—we need human eyes on the output, we need testing to see if AI is generating what we need it to generate.”

While AI is evolving at a rapid pace, independent agents, like so many industries, recognize AI as a natural progression in the tech space that creates a multitude of efficiencies for agencies.

Currently, “the questions that I get from agents that want to implement some form of AI into their agencies are regarding add-ons to their agency management system (AMS),” says Annette Ardler, vice president, professional liability underwriter and risk manager, Swiss Re. “Things that are going to either help document files for them so they don’t have to do it manually, or if it could read and compare policy forms to see what differences there are to be able to point them out to the customer.”

As AI’s capabilities change, these questions may change, too. Nevertheless, many agencies are proceeding with a mix of enthusiasm and trepidation as they come to terms with AI, as well as the implications for their agency going forward.

Wherever an agency is on its AI journey, the technology brings unique risks that were not previously contemplated under traditional E&O policies and key risk management procedures should be put in place to manage and mitigate E&O AI-related risks.

“AI is an extension of the people who are using it, so it’s up to them to use it responsibly,” says James Redeker, senior underwriter, vice president, Swiss Re. “If you’re using AI to replace a function that you’re already doing, do the two side by side for the first few months. Don’t turn it over to AI until you’ve got it dialed in where it’s doing as well or better than the way the humans were doing it.”

“AI can be a valuable tool for tasks like coverage comparisons or helping craft language for presenting a quote,” says Joey Franiak, broker, professional liability, Burns & Wilcox. “It can streamline the process and make your life easier, but it’s not a replacement for diligence. Agents and brokers still need to perform system checks and ensure they’re presenting information in a way that truly protects their clients and themselves.”

While utilizing AI as a tool to enhance efficiency or to address a specific issue provides a pathway to agency growth, its proper use is key to reducing E&O claims against an agency. A clearly defined formula of risk management and risk mitigation procedures can help avoid such claims.

To protect themselves, agencies need to ensure that they are working with a fully vetted and reputable AI vendor. “Make sure you’re reading your vendor contract,” Ardler says. “That is not something carriers can help with because that’s legal advice, so agents would have to review it with their own counsel.”

Further, mutual indemnification clauses within the contracts are significant when it comes to the limits of liability. “We’ve seen so many of these contracts that will limit the liability of the vendor to the last six- or 12-months’ fees that an agency has paid, and that’s their full limit of liability,” Redeker says. “An agency could be throwing away its reputation and have large E&O claims, and the most it can get back are the fees that were paid because it legally signed away its rights.”

Agencies should also put a governance policy in place to ensure staff are both trained and aware of what AI software is compatible with their agency.

“There are some firms where you have employees using various AI apps because there is a lack of guidelines in place relating to its use,” Kiefer says. “There’s a lot of risk with that because not every app is the same as the next app, and if you don’t have quality control on the output, you run into a lot of potential problems.”

Building an AI strategy will “allow agencies that are able to leverage technology to deliver more options for their clients in a cohesive manner,” says Ben Woodward, national vice president, underwriting, Admiral Insurance Group. “Technology can be efficient and effective for agent services, such as coverage comparisons, but these need to be checked by humans to ensure accuracy and reasonableness.”

Olivia Overman is IA content editor.