Markel Cambridge Alliance is committed to increasing awareness and understanding of investment professional liability insurance for the financial planning professional. To this end, we provide the following list of questions most frequently asked to us as underwriters. We recommend you ask these questions any time you are considering purchasing professional liability coverage.
What is the A.M. Best rating of Markel Cambridge Alliance?
Ratings are a measure of financial strength and ability to pay claims. Markel Cambridge Alliance enjoys an "A" rating by A.M.Best, an agency which rates insurance carriers. That rating is defined as "excellent" by that agency.
How long has Markel Cambridge Alliance been offering this type of coverage to investment advisors and financial planners?
The principals of Markel Cambridge Alliance began offering this type of coverage under a program offered by Financial Services Mutual Insurance Company (FSM) in 1988. In April, 1996 the program was moved to a large carrier. In June of 2007, The Cambridge Alliance was acquired by Markel Corporation, a marketer and underwriter of specialty insurance programs. .
What professional organizations endorse the program or refer members?
Call the Financial Planning Association (FPA) (1-800-322-4237) and the National Association of Personal Financial Advisors (NAPFA) (1-800-366-2732) to obtain references for professional liability insurance.
Is E&O coverage available to all brokers?
Coverage is available in all 50 states to any broker with a surplus lines license.
Will I have a gap in coverage if I change carriers?
If you have existing comparable coverage which you are replacing and you make the change while you are still covered under your old policy, the answer is no. Make sure that your retroactive date on your expiring policy is preserved on the replacement policy so that you have continuous claims-made coverage for prior acts.
How are defense costs handled?
Determine on what basis defense is provided under the policy. Our policy has the "right and the duty to defend" which is the strongest defense provision possible. Other defense clauses used in the industry are the "option to defend" (which allows the insurance company to decide whether it will defend you) and/or the provision to provide defense on an indemnity basis where you manage and pay for the defense and then the insurance company reimburses you.
If your policy is canceled or non-renewed by your insurance company, does it contain language which gives you a contractual right (written into the policy language), which cannot be denied by the company, to purchase an extended reporting period endorsement (tail) of at least one year's duration?
Some carriers will give you a contractual right to an extended reporting period endorsement, but this period is only for 90 or 180 days. Our policy provides a contractual right to an extended reporting period endorsement of one year if we cancel (except for non-payment) or non-renew your policy.
Does the policy have an "incident trigger" in its definition of claim?
An incident trigger allows you to report not only written demands for damages (claims) but also incidents which might reasonably be expected to give rise to a claim at a later date even though you have not had a written demand from a client. Our policy has an incident trigger which you will find in the CONDITIONS, Section 2. Notice of a wrongful act that may give rise to a claim (last paragraph.)
Does the policy cover fee activities only or fee and commission activities as well?
Some insurers of investment advisors offer coverage only for fee activities. Subject to policy terms and conditions, our policy covers both fee activities and product sales coverage in the areas of securities, life, health, disability and accident products. Our policy's product sales coverage is designed to be an adjunct to the financial planning activities of the advisor. Therefore, it is designed for mainstream products. Read Exclusion 30 (concerning alternate investments) carefully. Our policy "bundles" coverage for both fee and commission activities in one policy to allow for a wide range of variation in the nature of practices. It is not uncommon for practitioners to gradually migrate their practice from fees and commissions to fee-only.
Does group coverage under a broker dealer cover my investment advisory activities?
If you are both a registered representative with a NASD broker-dealer and a Registered Investment Advisor with the SEC, and you conduct investment advisory activities "away from" your registered NASD firm, make sure you discuss this with your broker-dealer and confirm the broker-dealer's position on NASD 94-44 and how any broker-dealer policy regards these activities. If you are not familiar with NASD 94-44, see your broker-dealer or call the FPA (1-800-322-4237) to obtain more information.
Are the aggregate limits under my broker dealer group policy sufficient to cover me?
If you are reviewing a broker-dealer policy, remember that the aggregate limit may be quite high for a broker-dealer policy, but that it is shared by all registered representatives insured under the broker-dealer policy. Our policy's aggregate applies to your practice only. Take this into consideration when you are doing premium and coverage comparisons. While the policy limits may be the same, the number of people sharing the aggregate will be quite different.
Can I take my coverage with me if I move to a different employer or go out on my own?
Once written, your policy is portable regardless of changes in your broker-dealer affiliation or your life company affiliations. Under a broker-dealer policy or a life company policy, you may lose all coverage once you change broker-dealer or life affiliations. Your broker-dealer could also lose its insurance or change carriers. If you have your own policy, you retain control of your insurance. Under the claims-made policy form, you will maintain your original "retroactive date" (date on which you first obtained claims-made coverage) as long as continuous coverage is maintained in effect without lapse. This will preserve coverage for your prior acts back to the original retroactive date. Consider the importance of portability and the preservation of your retroactive date. When insurance is controlled by someone else acting on your behalf, or by the claims experience of other practices, the result may be the loss of your coverage.
Should I maintain coverage both independently and under a broker dealer?
Many practitioners maintain coverage with both an individual policy and a broker-dealer group policy. The practitioner does this to assure that if anything happens to the broker-dealer coverage, they will still have independent coverage which they control and which maintains their retroactive date. Please read the Other Insurance clause in the CONDITIONS Section of your policy for the handling of claims covered by more than one insurance policy. Our policy is excess over any other valid and collectible insurance. If the other insurance policy has similar wording, then, as a practical matter, the two carriers coordinate to work out each carrier's role in a covered claim.
How is the policy rated for premium cost? Are "claims-made step factors" used on renewal rating?
Claims-made step factors are increases in premium which are not based on revenues or staff count. Their purpose is to increase the premium in each of the first several renewals eventually leading to a stable fully mature rate which is much higher than the first year rate. Our program does not utilize claims-made step factors. We have created a level rate structure to avoid the sharp increases on renewal caused by claims-made step factors. Renewal rating is no different than new business rating. The premium is driven by the number of financial advisors, the gross annual revenues, the limits and deductible chosen and the nature of the practice, (i.e. discretion, fee-only, etc.).
Are discounts available?
We offer a multiple advisors discount if the aggregate limit is shared by more than one advisor. Members of certain associations and advisor organizations receive discounts. We also offer a fee-only discount to practices which do not engage in product sales or discretionary asset management. Higher deductible options are available to practices with gross annual revenues of $150,000 and higher.