Your E&O insurance might cost less and provide more coverage - by John Torvi

Do insurance premiums ever go down? And still provide more coverage? The answer could be yes to both. But first, we can take a look at what drives the cost of any insurance policy. Besides the obvious “back room” expenses of a policy, such as administrative costs and defense attorney fees, the primary driver is the risk of severe or numerous claims. The insurance environment for appraisers has not been favorable in recent memory. The housing crash led to almost unprecedented numbers of E&O claims and licensing complaints. The mounting costs for the insurers led to higher premiums and stricter underwriting for appraisers and many other real estate professionals. 

There were additional consequences of this scenario, however, that have eventually led to a more positive underwriting environment. The number of appraisers has decreased and those that remain in their practice are typically the most committed, skilled and professional appraisers. These appraisers have fewer malpractice claims. Fewer claims (and complaints) mean less money spent by the insurers for liability and defense. Over-reaching threats like Llano and onerous liability clauses in AMC contracts have significantly lessened or disappeared. With the Llano (and related First Mutual) attacks, the insurers themselves banded together to defend their appraiser clients against the thousands of lawsuits filed by Llano against appraisers. Similarly, appraisers and some insurers worked together to make sure that any Hold Harmless or liability clauses in AMC contracts did not negatively impact or increase risk for appraisal professionals. 

A major factor of the more positive underwriting climate has to do with growing strength and influence of professional associations working on behalf of the appraisal community. Through quality educational programming and promoting and developing legislation aimed at benefitting members as well as the general public, significant progress has been made in strengthening the professional appraiser community as well as the skills and success of individual valuation professionals. Playing a major part in this has been the MBREA. On a local, regional and national level, the MBREA has become a major voice for the profession and has positively impacted the daily activities of boots-on-the-ground appraisers. It has helped to create a more regulatory-friendly environment as well as increased the practical skills of members, again all resulting in fewer lawsuits in Massachusetts and elsewhere.

So is your insurance premium going down or are you receiving more coverage? That of course depends on your insurance company. The Landy Agency, working with our insurance carrier partner Great American Insurance Co., has recognized the success of all the efforts noted above in Massachusetts and additional locations. This has allowed us to lower premiums and still add in important enhancements such as bodily injury/property damage and drone usage coverage. Our insureds will begin seeing these changes over the coming months. While no one can predict what the real estate or insurance climate might be in the future, currently we are able to benefit from the hard work of the New England appraisal community in creating a more professional, and regulatory positive scene. As long as appraisers continue to improve practice methods and support the efforts of groups like the MBREA, we can hope for a long and positive insuring climate for appraisal professionals.

John Torvi is vice president of marketing and sales at the Herbert H. Landy Insurance Agency, Needham, Mass.