E&O Insurance: Take as Needed

It had been years since we engaged with an E&O company, so we wondered if maybe something within that industry had changed?  Spoiler alert: it hasn’t.   

I have never understood the concept of E&O insurance for real estate agents.  This is because I either know nothing about the E&O marketplace OR, I know the E&O marketplace all too well?  It’s hard to say?

One thing that most can agree on is the E&O marketplace has to be one of the quietest, most stealthy run, billion dollar-a-year industries on earth.  Ever see a E&O ad?  An E&O article?  Ever hear of an E&O “success story”? 

What billion dollar-a-year industry has no success stories?  This was one of many questions I recently asked Paul Bondy, of PBI Group Solutions, a leading provider of E&O products for the real estate community.  His response was wonderfully honest.

“I don’t sell success stories…that’s not what this is about.  I sell the most comprehensive real estate E&O product for those who believe they need it”. 

Drink that in for a second; “for those who believe they need it”.  Wow.  Being a fan of history and more specifically, sales history, this is a well-worn pitch we have all heard a thousand times before. 

Elixir salesmen hawking their wares out the back of horse drawn carriages.  Selling a cure for, “whatever ails ya”.  Tent revival Preachers pitching heavenly salvation via donation to only those who, “believe”.  Can’t watch TV today without a Prevagen ad or two.   Despite the FDA’s warnings that Prevagen has absolutely NO VALUE, they continue to sell to those who “believe” they need it.  

I asked Mr Bondy how he, “proves his product works?” 

“I don’t prove E&O works any more than you prove that using a realtor to sell my home works, or someone needs to be proven that buying health insurance works, or buying car insurance works”.

The problem is the other industries cited by Mr Bondy (real estate, healthcare, and auto coverage) have literally mountains of data showing the effects of their products and service offerings.  Yes, it is very easy to see how and why Health insurance works.  Auto insurance isn’t optional because it’s a fact–it works.  And nobody provides more historical data than the real estate industry?  The point is the original question was never answered.  The truth is, E&O can’t really be proven to work.  Maybe it works.  Maybe it doesn’t? 

If you feel better for having paid for E&O insurance.  Then it’s working. 

Years ago Wynd Realty asked two different law firms what a Sales Agent filling out a pre-approved contractual form would have to do to find themselves in need of E&O insurance?  If you take Property Management off the table, the only 2 infractions that could get an Agent in trouble are, lying and false or misleading disclosure. 

Care to guess what two infractions are NOT covered in the standard E&O policy.  Yep; lying and disclosure related issues.  This always brings me back at square one; what is E&O insurance for again?

For the majority of real estate agents in the United States, E&O insurance is required.  The requirement for E&O comes from local licensing Boards as well as being written into many national franchise agreements.   There really isn’t a specific reason for “requiring” it.  It simply comes with the territory.  An extra add-on you weren’t supposed to notice.

In Atlanta Georgia, E&O insurance is NOT required.  Agents can opt to have it if they want.  Over the last 14 years, Wynd Realty has had thousands of agents come and go.  This year we will celebrate our 2,500th home sale.    Not a single agent or transaction has ever been covered by E&O over than time. 

I would like to thank Paul Bondy, of PBI Group Solutions, for his discussion on this topic.  While we may not agree, Paul is a professional and I truly believe in his sincerity and passion for the job.   If you think you need E&O, be sure to look him up. 

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