liability insurance

[MJ Hartman]

I just got our new quote for e&o coverage for our tpa firm. premiums up 45% from last year? I realize that the premiums increase when our annual revenues increase, but this is unbelievable.

is this standard practice? a $15k deductible is in place and the vendors we work with (Nationwide, Hancock)_require 1million in coverage...

in business for 6 years and 25 years of admin. experience and no claims... this seems unreasonable.

any comments? thanks.

[Guest Happy Actuary]

I find that if you shop it around then the price miraculously drops. Ours went up around 17% this year but we only really have the enrgy to shop it every other yr.

Good Luck!

[Lori H]

under what circumstances would a TPA need e and o insurance especially one that does not sell products? TPA's do not have fiduciary liability.

[K-t-F]

Or sign the 5500 or schedule P.

[Belgarath]

Many people just use the term E&O loosely to refer to any kind of professional liability or malpractice policy, or use the terms interchangeably. I'm guilty of this myself. Fortunately, we never make mistakes.

[Lori H]

Irregardless, in what instance would a TPA require or want to obtain costly E & O insurance. There are so many plans who do not even have a TPA!!!! Ultimately the plan sponsor/trustee is responsible for maintaining the qualified status of their plan.

[Belgarath]

Lori - there is truly no disrespect meant by this response, so if it sounds that way, I apologize.

Are you a TPA? And if so, do you really not have any professional liability coverage for your firm?

If you aren't a TPA, then you probably don't need to know all the possible reasons why it might come into play. But consider just one small example - your actuary (yeah, let's pick on the actuaries) totally misapplies the law/regulations, and advises the client to either over contribute or under contribute by several million dollars, as well as blowing the nondiscrimination tests for several years running. Plan is subsequently disqualified by the IRS. While the client is liable for the penalties, how many clients do you know who wouldn't then require reimbursement? If you have such clients, I'd love to know where to find some of them. Ours attempt to hold us liable for the mistakes THEY make.

Our world is fraught with peril...

[A Shot in the Dark]

Lori:

Ulitmately, Professional Liability (Errors and Omissions) Insurance serves as protection for our mistakes.

But as a TPA firm all of our larger clients require that we have a policy in place. In the last couple of years every RFP that we have answered has required that we have some form of coverage.

Not to mention all of the vendors.

Not to have E&O would be a marketing and sales nighmare.

[SoCalActuary]

Let's say you did everything right, but you have a lawyer for a client. Big mistake, I know, but:

Lawyers sue people. Without insurance, you have to pay to defend yourself. With insurance, they pay the

defense team. Defense fees can easily reach $25,000 just to get the case dismissed for lack of evidence.

More typically, costs run well over $100,000.

Now we could assume that you never make decisions that could be challenged in court. Further, your competitors never challenge your work, because you always have the clearest explanation and the exact interpretation that the IRS would apply. Your clients always appreciate the work you have done, and never dispute your fees. Your service agreement clearly describes the scope of your work, which you never exceed. And furthermore, you never have to deal with clients who are just unhappy and looking for someone to take the blame.

Or, maybe your firm is featured in a Martin Scorcese movie, and no one would dare to sue you, because you could give them a compelling argument they couldn't refuse.

If not, you might consider the risks of going uninsured.

[Lori H]

We are a TPA firm , we handle small one participant DC plans with no plan exceeding more than 200 participants, so we do not see transactions dealing in the 7 digit range, 6 even. You practically have to kill someone to get a plan disqualified. I'm not saying we are infallible, but the high cost of E&O and its increasing premiums would force me to cut benefits

[Guest OneChek]

under what circumstances would a TPA need e and o insurance especially one that does not sell products? TPA's do not have fiduciary liability.

If the TPA is a truly licensed TPA in most all states in the USA, all NAIC compliant rules are uniformly requiring both TPA Fidelity bonding as well as TPA E&O. Even worse, if you provide billing services, you now have to hire a CPA to prepare a state compliant full audit each year, at a cost of several

$1000's.

B Ball

President

Healthcare Assurance Corporation

[Guest Happy Actuary]

We are a TPA firm , we handle small one participant DC plans with no plan exceeding more than 200 participants, so we do not see transactions dealing in the 7 digit range, 6 even. You practically have to kill someone to get a plan disqualified. I'm not saying we are infallible, but the high cost of E&O and its increasing premiums would force me to cut benefits

Its not about getting a plan disqualified. There are other ways to screw up. If you pay someone out the wrong amount it will be your fault. There are more ways than you can imagine to get sued. Its not personally important that you get the coverage but most people view it as a cost of doing business. You take the other view at your own peril. The other thing about it is that profit margins are sufficient in the rest of the TPA world so that other firms can provide benefits and can also afford E&O. Good luck!!