What Every Agency Owner Needs to Know About Professional Liability Risk
In today’s insurance landscape, the role of the agency owner has expanded well beyond placing coverage. Clients expect guidance, help interpreting complex language, insight into emerging risks, support during claims, and proactive advice on avoiding loss in the first place.
These expanded expectations broaden the scope of professional liability exposure in ways many owners may not fully recognize. Agency leaders should take a fresh look at how well their professional liability protection reflects the work they actually perform.
Agencies Are Doing Much More Than They Realize
Across the country, agencies are providing services that fall outside the traditional definition of insurance placement. Yet many errors & omissions policies still rely on narrow, outdated descriptions of “professional services,” inadvertently leaving agency owners exposed.
In addition to securing insurance coverage, your agency may be providing:
- Consulting.
- Risk management guidance.
- Loss control support.
- Notary services.
- Continuing education instruction.
- Expert witness work.
Unless an E&O policy explicitly spells out coverage for these activities, the agency may be unintentionally absorbing risk.
Emerging Professional Liability Trends Impacting Agencies
While agencies take on more diverse responsibilities, several external forces are simultaneously increasing the likelihood and severity of E&O exposures. These trends are shaping how agencies must think about documentation, communication and risk management in 2026.
AI-Driven Client Interactions and Documentation Risks
Artificial intelligence (AI) tools are influencing both how clients research insurance and how agencies manage their operations. Clients now arrive armed with AI-generated summaries, comparisons, and interpretations that may only be partially correct. These initial impressions can shape what clients expect their agent to verify, correct, or expand on.
Meanwhile, agencies are experimenting with AI-powered tools for marketing, communication, and even drafting content. While these tools improve efficiency, they create new questions:
- Did AI wording inadvertently misstate a policy provision?
- Could an automated response be interpreted as advice?
- Is staff reviewing AI-generated content with the same care as human-authored material?
This environment heightens the need for human oversight, careful documentation and clear boundaries around what constitutes personalized advice.
Social Inflation and Higher Expectations During Claims
Social inflation continues to push settlements higher and embolden plaintiffs. When clients face unfavorable claim outcomes, they are more likely to revisit earlier conversations and assume the agency failed to warn them about exclusions, limitations or alternative coverage options. Without strong documentation, agencies face increased dispute risk when claims outcomes disappoint. Thorough notes, proposal disclaimers, and documented offer-and-decline conversations are more important today than ever.
Growing Cyber and Technology-Related Advising Risk
Even agencies that do not specialize in cyber insurance increasingly field cyber-related questions. Clients regularly ask agents to interpret carrier requirements, explain cyber applications or evaluate whether certain controls are necessary.
This advisory gray area creates risk. A casual suggestion about cybersecurity practices, or an off-the-cuff explanation of a complex cyber exclusion, may later be scrutinized as professional advice. Agencies need to ensure staff understand where their advisory role begins and ends—and that their E&O policies contemplate the conversations they are already having.
Privacy, Data Handling, and “Incidental” Digital Exposure
Agencies now act as custodians of sensitive personal and commercial data. With state privacy laws expanding, even minor missteps, such as sending documents to the wrong recipient, can trigger allegations of negligence.
These risks do not fall exclusively under cyber coverage. When clients believe they were misinformed about privacy obligations or that their agent handled data improperly, E&O claims can follow.
Clients today expect faster responses, more detailed explanations and more proactive engagement. A delayed response, ambiguous explanation or overlooked detail can more easily be viewed as a failure to meet professional standards.
2026: The Right Time to Reevaluate Your E&O
Given the evolution of both agency responsibilities and client expectations, now is the ideal moment for leaders to reexamine their E&O programs. These three foundational steps can help ensure your coverage aligns with your actual exposure:
1) Audit every service your agency provides. Document every way your staff interacts with clients. If your E&O does not explicitly cover these services, address the gap.
2) Review who qualifies as an insured. If your agency uses contractors, part-time educators, or has acquired books of business or small entities, ensure your E&O form includes these extensions of your organization.
3) Examine exclusions and carve-backs carefully. Pay particular attention to insolvency language, punitive damages provisions, cyber-related exposures, and privacy-related exclusions. Outdated language can create unintended blind spots.
The insurance agency of 2026 is not the agency of 2016. Your professional liability coverage should reflect the agency you’ve become, not the agency you once were. Whether it’s notary services, educational work, risk advisory guidance, or client support, make sure your E&O policy protects the full scope of what you do.
Learn more about Munich Re Specialty’s Insurance Professional Liability product.
Kelly J. Basler is miscellaneous professional liability underwriting manager, Munich Re Specialty – North America.
