Canadian Accredited Insurance Broker (CAIB) One Practice Exam

What is the main reason for errors and omissions claims in insurance?

1. Failing to identify client's loss exposures and offering adequate coverage

2. Providing excessive coverage to clients

3. Neglecting to follow up with clients regularly

4. Inadequate training of brokers

The correct answer is: Failing to identify client's loss exposures and offering adequate coverage

The main reason for errors and omissions claims in insurance is often tied to the failure to identify a client's loss exposures and provide them with adequate coverage. Brokers have a critical role in understanding the unique risks that each client faces and ensuring that the insurance products they offer adequately address those risks. When brokers do not thoroughly assess a client's specific needs or overlook certain exposures, clients may end up underinsured or without the necessary coverage for their particular situation. This oversight can lead to significant financial repercussions for the client when a claim arises, resulting in the client holding the broker responsible for not providing sufficient protection. Errors and omissions claims highlight the importance of comprehensive risk assessment and clear communication between brokers and clients about coverage options and limits. While factors such as providing excessive coverage, neglecting client follow-ups, and the need for adequate training can contribute to overall service quality and client satisfaction, they are not the primary drivers of claims related to professional errors and omissions. The essence of these claims typically relates more directly to the fundamental responsibilities of brokers in identifying and meeting clients' coverage needs.