There is much talk in the insurance industry regarding the possible upcoming Department of Labor Fiduciary Ruling and the impact this will have on insurance agents and advisors. Whether the new administration approves or does not approve the proposed ruling, many companies have indicated they will still be implementing best interest contracts.
The basis of the ruling really comes down to how an insurance agent or advisor is compensated by the insurance company so that the insurance agent or advisor is working in the best interest of the client and not swayed by the compensation offered by different products available. Much information regarding the ruling can be found here.
Many agents are concerned on how the ruling will impact their Errors and Omissions coverage. The Errors and Omissions Insurance marketplace, for the most part, is taking the stance of ‘wait and see’ attitude. As for now, the underlying professional services that are being provided by an insurance agent or advisor are not changing under the ruling.
As such, coverage provided under an Errors and Omissions policy will not be impacted as respects the professional services provided. The Errors and Omissions insurance carriers will be taking a look at the policy coverage and exclusions once a final decision has been made and making any necessary modification(s) to the policy wording so that their intent remains to provide coverage for professional services as defined by the policy.
Typically, policies have an exclusion relating to investment advice provided by an agent as a Fiduciary Advisor if the investment advice is not provided pursuant to and in accordance with all of the requirements of the Pension Protection Act of 2006 as it may be amended. It is the intent of the Errors and Omissions insurance carriers to modify this exclusion to make reference to the new ruling as well.
In the event a claim is made regarding a dispute of compensation, there would be no coverage. Errors and Omissions policies are not designed to respond to disputes of this nature.
As with any ruling, an agent should adhere to the guidelines imposed by the carriers they represent with respect to the Professional Services being provided. Any questions or concerns with the compliance should be directed to your insurance company representatives, Independent Marketing Organization and/or Broker/Dealer. It is important to stay abreast of these changes and how this impacts your activities in dealing with your clients and prospective clients.
A well-documented file can be key in defending Errors and Omissions claims and insurance agents and advisors should always work with the best interest of their client in mind.