Best Practices for Working with the E&S Market
Agencies must often use the Excess and Surplus (E&S) Lines market to meet clients’ varied needs. Whether the market is hard, soft, or somewhere in between, E&S entertains varied exposures and plays a vital role in insuring high property values as well as risks wanting extremely high liability limits.
Using the E&S marketplace presents some significant challenges and issues that can raise the potential for an increase in the agency’s E&O exposure. It is vital to develop the appropriate processes to handle challenges when they arise.
Understanding Coverage Requests
Being fully knowledgeable about the coverage you are requesting when working in the E&S market is essential. This market is frequently used for non-traditional or problematic risks and often employs non-standard forms to provide coverage. Do not rely solely on the carrier or wholesaler to fill any gaps in your understanding – your know-how is crucial.
Application and Proposal Follow-Up
After submitting an application, follow up to confirm that it was received and that a proposal will be provided by a specific date. This allows you and your client enough time to review the terms. As the proposal date approaches, periodic follow-up is recommended to verify that the proposal is on track to be delivered as promised.
Comparing Submission and Proposal
Once you receive the proposal, carefully compare it to the coverage you requested in your original submission. It is common for the E&S market to omit certain coverage elements. As the retail agent, you are responsible for ensuring that the coverage delivered matches what the client requested.
Reviewing Specimen Forms and Endorsements
Obtain specimen forms from the E&S market, which is known for issuing unique policy forms that can significantly alter coverage. Review these forms thoroughly, including any endorsements. Pay close attention to endorsement titles, as they may reduce coverage even if not specifically labeled as exclusions.
Binding Coverage
Do not advise your client that coverage is bound until you have received confirmation from the wholesaler or carrier. Retail agents typically do not have the authority to bind coverage on behalf of the wholesaler or carrier.
Binding Procedures and Timing
Establish procedures to ensure coverage is bound at or before the policy’s expiration date. If coverage is bound after the expiration date, the E&S market may refuse to backdate the coverage, potentially leaving your client exposed.
Renewal Review Process
Review renewals early to determine if there will be any significant differences in coverage in the renewal proposal. Unlike the admitted market, where carriers are required to provide conditional renewal notices if coverage will be reduced, the E&S carrier/wholesaler is not held to this requirement and is not obligated to inform you of changes.
Final Policy Check
Carefully review the E&S policy to confirm that the coverage provided matches what was ordered. This final check helps ensure that you and your client receive the expected protection.
The E&S marketplace plays a vital role in the industry and has different procedures than standard markets. Develop the appropriate procedures because these differences present many significant issues and challenges. Following these procedures can play a key role in reducing the chance of problems developing.