E & O insurance providers endorsed by CAAMP and other professional associations are facing a run for their money as competing insurers win over brokerages fleeing premium hikes.
“The fact is that we are not doing a lot of advertising,” Andrew Reid, principal insurance broker and director at Purves Redmond Ltd., which accesses errors and omissions insurers not specifically endorsed by mortgage broker associations. “But mortgage brokerages are coming to us through word of mouth and they’re a mix – brokerages that are and brokerages that are not currently receiving coverage from the insurer-partners of their professional associations.”
The uptick in interest and, indeed, business for insurers operating without a specific endorsement from either CAAMP or one of its provincial counterparts comes as Alberta brokerages face their first-ever requirement to hold E&O insurance. They must also show that they’re covered for loss resulting from “fraudulent acts in the carrying on” of their business. Their insurers are to provide proof of that coverage to industry regulator RECA on or by Sept. 1, that deadline timed to sync with relicensing.
The insurance requirement in Alberta largely mirrors those of Ontario, Saskatchewan and, now Manitoba: $500,000 for a single occurrence and $1,000,000 for all occurrences in a 365-day period for both liability and fraud coverage.
The increased demand Reid – and the several other insurance brokers representing providers like GCAN, Chubb and Chartis – is now fielding is coming from Alberta, but also Ontario. Some brokerages in the central province are now grappling with significant increases in insurance premiums as claims – especially involving private lending deals – rise and insurers fine-tune risk assessments for individual firms based on claims, funded volume, number of agents and other key determinants of risk. The end result is substantial premium increases for some brokerage.
“In one case, a brokerage came to us with a renewal for five times the amount they paid last year,” Reid, whose E&O book is largely comprised of GCAN policies. “Brokerages are now looking around for better deals and the rates that we’re accessing for them are competitive.”
While broker associations have entered into “partnerships” with individual insurers, there is no specific requirement for brokers to use any particular service provider in order to win provincial licensing. Still, those associations do endorse their partners, an effective and coveted marketing tool for insurers like Encon Insurance Managers Inc. – CAAMP’s partner.
Reid, with a portfolio of 200-plus brokerage clients, maintains that the rates he accesses on their behalf are competitive with those preferred insurers, with brokerages increasingly willing to explore their options outside their professional associations.
Although CAAMP continues to provide its members access to highly competitive rates, the association’s president Jim Murphy told MortgageBrokerNews, “the rates are competitive depending on individual claims histories.”
It makes brokerage to brokerage comparison difficult, although has done little to silence industry concerns about escalating premiums.