This isn’t your parents’ E&O insurance. Worries over the exposure that could result from the Department of Labor’s fiduciary proposal have 401(k) advisors looking to get covered. While fiduciary liability insurance is on the rise, industry watchers are worried about the impact the rule could have on policy provisions.
In particular, “some people in the financial-services industry are concerned that insurers will further restrict the products they cover if the [DOL], as expected, requires advisors working with retirement accounts to act as fiduciaries, putting their clients’ interests first,” The Wall Street Journal reports, noting that Congressional opponents of the Labor Department measure are trying to derail or delay the rule as part of this week’s wrangling over a spending bill required to avert a government shutdown.
“If you apply a higher standard [to advisors], insurers will apply more scrutiny, more caution, more cost and certainly more restraint in approving products that they will insure,” John Niedernhofer, a principal with Marsh & McLennan Insurance Agency, told the paper.
The Journal cites a survey of NAIFA members that find nearly 87 percent indicated “they anticipate the implementation of the Labor Department fiduciary rule would result in higher errors-and-omissions insurance premiums for their practices. Of those, 58 percent said they expect their premiums to increase ‘substantially.’”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
