"Directors & officers insurance is the only policy that can adequately protect board actions," says independent agent William Simons. "The decisions and actions board members take are their personal responsibility."
Rust Insurance Agency LLC
How did you get started at your agency?
I used to work for CNN in both London and Atlanta and was looking to make a change. My father, who along with one partner owned the Rust Insurance Agency, wondered if I would be interested in getting into the insurance industry. I was and I did just about everything you can do at an agency and started handling a book of business and growing it. Twenty years of hard work and a buyout paid off and myself and two partners now own the agency and we couldn't be happier.
We have a large book of nonprofits and all of them have boards. Directors & officers insurance is the only policy that can adequately protect board actions and decisions protecting their fiduciary responsibility to the organization. The decisions and actions board members take are their personal responsibility. Without some avenue of financial recourse, these actions could put their personal assets at stake. Having D&O coverage is crucial if you sit on any board—whether it be your homeowners association, a children's hospital board or anything in between.
Challenges in the D&O market?
Historically, D&O coverage had been based on loss experience and revenue. Now the EPLI market has made things a little more difficult with recent social issues affecting the underwriting scale and rating. In other words, things have gotten difficult.
Approximately 80% of D&O claims come from the EPLI side. With all of the layoffs associated with COVID-19 as well as the some of the social problems regarding the #MeToo movement, we've seen quick reaction by carriers to self-correct the influx of claim activity.
Over the last couple of years, we started seeing rates go up and underwriting became a bit more heavily scrutinized than in the past. Some carriers would typically automatically renew coverage, but not anymore—they're looking at everything. It's indicative of the entire insurance market.
With all the increased activity in rating and what carriers are looking to write and not write, some of the regular appetites are narrowing. I do, however, think things are starting to level a bit from a pricing standpoint. It's likely that this is the new “normal" that we can expect moving forward. I don't see any sign of it getting worse for the time being but we're on a new playing field with a new level of underwriting and pricing, as a baseline.
Advice for a fellow D&O agent?
Listen closely and ask the prying questions, so that you understand the risk. Insureds like to talk; let them. I always pre-underwrite my clients so that I get a better sense of where to place their coverage. It makes selling the risk to an underwriter much easier.
Olivia Overman is IA content editor.