Business News

A Hidden Risk for Life Insurance Agents

Does Your E&O Insurance Protect You Against TCPA Violations?

Written by: Paul Bloodsworth

August 18, 2024

[5 minute read]

Summary

As a life insurance agent or financial advisor, your ability to communicate directly with clients is crucial for success. Whether you’re discussing policy options, following up on leads, or providing timely financial advice, phone calls and text messages are indispensable tools of the trade.


However, these same tools can also expose you to significant legal risks under the Telephone Consumer Protection Act (TCPA). Violations of the TCPA can lead to severe penalties, including costly lawsuits that your Errors and Omissions (E&O) insurance may not cover.


I'll say this again, "January 26th, 2025 starts an entirely new era for life insurance agents and financial advisors who use the telephone to contact lead clients."


In this article, we will highlight 4 major points:

"It's crazy what's about to happen."

Eric Troutman, Troutman Amin, LLP

E&O Insurance: What it Covers, and What it Doesn't

Errors and Omissions (E&O) insurance is required for life insurance agents and financial advisors. It protects you against claims of negligence, errors, or inadequate advice that could lead to financial loss for your clients. However, it’s important to understand that most standard E&O policies do not cover TCPA violations.


TCPA claims are often categorized as “intentional acts” or “statutory violations,” which are typically excluded from E&O coverage. This means that if your outreach efforts inadvertently violate TCPA regulations, your standard E&O policy may leave you exposed to substantial financial risk.


We've published an article on how the new FCC rulings affect the life insurance industry. Check it out here: FCC "Closes the Lead Generator Loophole"


Bottom Line: Your E&O will not protect you from the Plaintiff's Bar when you get reported for any of these violations, including:

  • calling without prior express written consent
  • using a generated number
  • failing to disclose who you are
  • failing to disclose which organization you represent
  • calling from an auto-dialer
  • using a "misleading" ad


IMPORTANT!

We are building a team of financial advisors and life insurance agents who take professionalism seriously.

If you are looking to join a team of advisors, minus the kool-aid, click here.

Specialized Coverage

Everyone in the chain...

But the agent is at the bottom of s**t pile..

Your E&O only covers you. The same applies to those around you in the chain. Their E&O only covers them. But, this is only for the applicable professional errors stated in the policy. Again, your basic E&O will not cover TCPA violations.


For professionals in the life insurance and financial services industries, the need for specialized coverage has never been more urgent. If your business involves regular telephone sales or client outreach, you should urgently assess your current insurance policy to determine if it includes protection against TCPA violations.

The good news is that there are specialized insurance products available, such as media liability or privacy liability insurance, that can be added to your existing E&O policy or purchased separately. These policies are designed to cover the gaps left by standard E&O insurance and provide protection against claims arising from TCPA violations.

IF you operate within the laws, you don't necessarily need the specialized coverage...


Steps to Protect you from TCPA Risks

It's up to the agents to decide how they operate....

  1. Review Your E&O Policy. Start by thoroughly reviewing your current E&O insurance policy. Look for any exclusions related to TCPA violations or “intentional acts.”
  2. Consider Adding Specialized Coverage. If your E&O policy doesn’t cover TCPA claims, consider adding a media liability or privacy liability policy. These specialized policies can provide the protection you need to safeguard your business against the risks associated with TCPA violations.
  3. Ensure TCPA Compliance!! Beyond securing the right insurance, it’s critical to ensure that your business practices are fully compliant with TCPA regulations. Regularly review and update your communication strategies to minimize the risk of violations.


Again, IF you operate within the laws, you don't necessarily need the specialized coverage...


Lead vendors don't want to hear this, but agents now have to require the very things that vendors don't want to provide:

  1. Proof of prior written consent from the lead
  2. Copies of the ads and forms used to generate the lead


Wise words: Be careful who you buy from...