With the pace of mergers and acquisitions among agencies picking up again, an industry group is bringing renewed scrutiny to a persistent yet often underestimated risk: errors and omissions (E&O) claims arising from post-deal integration.
While dealmaking has accelerated in recent years, the Independent Insurance Agents & Brokers of America (Big “I”) has warned that many agencies may be underprepared for the operational realities that follow. The result is a growing number of claims stemming not from the transaction itself, but from what happens after it closes.
Nancy Germond (pictured), executive director of risk management and education at the Big “I”, said these claims are typically delayed, making them harder to anticipate and prevent.
“Agency E&O claims that arise are lagging indicators,” she told Insurance Business. “We’re seeing claims arise after mergers.”
In response, the Independent Insurance Agents & Brokers of America (Big “I”) has released a new handbook to help agencies navigate these challenges and reduce exposure.
The publication, The Handbook for Preventing Errors & Omissions Claims in Insurance Agency Mergers & Acquisitions, comes as deal activity accelerates and operational complexity deepens across the independent agency channel. According to the association, one-third of agencies are planning ownership transitions within the next two years.
At the heart of rising E&O claims is a gap between deal execution and operational follow-through, according to Germond. Agency owners often focus heavily on financial due diligence, but less on how the acquired business will be reviewed, serviced, and integrated.
One of the most common pitfalls, Germond noted, is failing to promptly audit acquired policies. “Not getting into those claims, into those policies, soon enough to ensure that the coverage is right… especially if a renewal goes by and you don’t do your due diligence,” Germond said.
Waiting for renewal cycles, sometimes nearly a year out, can leave agencies exposed to hidden coverage gaps or outdated terms. To avoid gaps, Germond recommends a structured, proactive approach. “Put together a schedule,” she advised. “We’re going to take 10% of our book each month… and ensure that coverage is right.”
This kind of phased review allows agencies to systematically assess risk across the acquired portfolio, rather than relying on ad hoc checks or reactive fixes.
Another area agency owners frequently underestimate is technology integration. Incompatible systems can quietly disrupt core workflows, including renewals, endorsements, and policy issuance.
“Often the two systems don’t speak to each other,” Germond said. She shared an instance in which system failures at an agency led to a complete breakdown in renewal processing.
To mitigate this risk, agency principals must ensure systems are aligned, tested, and monitored early in the integration process to prevent errors that might otherwise go unnoticed until clients raise alarms.
Beyond systems and processes, the Big “I” also flagged human risk factors, particularly around employee capability and retention. Without proper assessment and training, knowledge gaps among staff can translate into errors in policy handling, documentation, or client advice.
At the same time, M&A activity often creates uncertainty among staff, increasing the risk of turnover.
“There’s also a growing trend… where agencies recruit employees from newly acquired firms. When employees feel uncertain about their future, they’re much more likely to explore opportunities,” Germond noted.
“Strong acquirers focus heavily on culture and integration. A common mistake, however, is telling employees that nothing will change. That’s simply unrealistic. Change is inevitable, and failing to acknowledge it can damage trust.”
Finally, one of the most sensitive and risky moments in any acquisition is the transition of client relationships. Longstanding clients often have deep personal ties to their existing agents. Disruptions to those relationships, if poorly managed, can lead to both attrition and increased E&O exposure.
“You don’t want to lose clients,” Germond said. “So that transition over to a new producer, to even a new CSR, is critical.”
In many cases, clients interact more frequently with customer service representatives than with producers. Sudden or poorly communicated changes can create confusion and frustration.
“I think sometimes we’re unaware of the transition… and then, boom… here’s your new CSR,” she said.
Such experiences can erode trust and make clients less forgiving if something goes wrong.
“If you have a good relationship with your agent, you are much more likely to forgive an error,” Germond added. “But when things change… you would be less likely to forgive errors.”
