C130 Chapter 9 Essential Skills for the Insurance Broker and Agent

STUDY 9 - Renewals, Endorsements, Premiums, Cancellations / Page 1

Renewals

1. Opportunity > connect with clients – review / offer improvements / new products and markets.
2. Retention > secures financial future of brokerage.
3. Process > ID policies / review account / contact client / order documents / invoice premium.
4. Personal Lines > receive list or renewal documents from insurer / contact large accounts.
5. Commercial Lines > review before documents issued / smaller accounts mya be automatic.

1) Pre-Contact Review

1. Identify policies due to renew – brokerage in house or insurer.
2. Multiple Lists > consolidate into one.
3. Abeyance System > sort by date order, monitor status – automated reports weekly.
4. Contact Clients Early > 60 to 90 days before renewal date v. client shopping.
5. High-Risk Renewals > note concerns – specialty cover / market change / claim in term.

2) Review with your Client

1. Discuss Account > create specific and personalized questions that elicit detailed data.
2. Lifestlye > home business /  new location, product, service / renovations / schooling.
3. Update Applications > complete those requiring annual submission – umbrella liability.
4. Previously Declined Coverage > floaters / increased limits / comprehensive form.
5. Update File > details / document conversation – signed, dated record or computer log.

3) Order Renewal

1. Quote Client > new premiums for changes – broader cover / new insurer.
2. Premiums > calculation – manual / electronic interface / contact insurer direct.
3. Notify Insurer of Changes > underwriters will adjust accordingly.
4. Significant Changes > remarket using current marketplace knowledge.
5. Current Market Knowledge    Changes and trends in marketplace:

    i) New Products > coverages and services – flag potential clients to offer.

    ii) Insurer Changes > mergers / name – reassure cover, service, temporary situation.

4) Remarketing   

1. Process > of changing insurers / resembles placing new business.
2. New Application > prepare / confirm detail (losses) / applicant signs / submit to insurer.
3. Initiated By > insurer / client / broker.
4. Reasons:    

1) Insurer Lapses

1. Withdrawn from market – no longer writing business.
2. No longer writing particular class – snowmobiles.
3. Material change in risk – use or occupancy of premises (store to restaurant).

2) Client Dissatisfaction    

1. Service Issues > why? – delays in response / issuing documents.
2. Liaise with Insurer > work out acceptable solution / avoid future problems.
3. Illustrate Benefits of Staying > unique coverages / premium discounts.
4. Premium Concerns > high (claim free) / low (overcharged prior years).
5. Explain Market > cyclical – hard v. soft / losses of few paid by many.

           

   

3) Market Canvass    

1. Protect Client Interest > ensuring comprehensive coverage for best price.
2. Opportunity > offer client alternatives or comparisons for review.
3. Broker Guidelines > frequency of canvassing – 3 to 5 years.
4. Recommendation > consider client needs – stay with current / switich.
5. Insurer Factors > policy terms / claim handling / $ stability / service / pricing.

               

4) Portfolio Transfer    

1. Entire Book > transferred from one insurer to another.
2. Initiated By > insurer or broker management.
3. Replacement > all policies of one insurer with new market on renewal.
4. Pre-Agreed Terms > premium increase / individual policy UW and pricing.
5. No Other Remarketing > direct transfer from prior insurer to new insurer.
6. Advise Clients > in writing – explain / reassure coverage, service continues.

5) Renewing the Policy   

1. Automatic         i) Insurer > sends broker system renewal 30-60 days before renewal.

ii) Property > limits automatically increased – inflation protection.

iii) Automobile > based on file information / current rate schedules.

iv) Review > client letter outlines changes = call back / appointment.

v) Changes > advise insurer – request endorsement, revised renewal.

vi) Abeyance File > documents < 30 days / review for accuracy.

2. Manual         i) Underwriter > reviews each file before renewal is issued.

ii) Reasons > size of policy / class of insurance / changes during term.

iii) Large Commercial > constant changes / rates based on receipts.

iv) Broker > gives insurer revised data / reviews renewal for accuracy.

v) Advise Client > changes – conditions / terms / premiums / insurer.

vi) Order Renewal > from insurer based on client instructions.

vii) Abeyance File > documents < 30 days / review for accuracy.

3. Restricted Terms     i) Outline to Client > may trigger remarketing.

ii) Buy-out Exclusions > insurer maintains current coverage at a higher premium.

iii) Higher Deductibles > insurer renews as is with higher deductibles.

iv) Sub-limits > insurer offers limited coverage amounts, no catastrophe limits.

v) Improve Risk > loss prevention (safety protocols) / loss reduction (alarms).

vi) Change Insurers > other insurer willing to provide same cover – ensure no gaps.

4. Binding         i) Confirm > client’s instructions / within binding authority.

ii) Exceeds Authority > seek written confirmation from insurer.

iii) Existing Insurer > insurer / policy # / state required changes.

iv) New Insurer > treat as new business – application with details.

v) Abeyance File > documents < 30 days / review for accuracy.

5. Document Discussions         Send renewal to insured with cover letter outlining:

    i) Differences > new policy and expiring one – coverage / limits / terms / wordings.

    ii) Declined > describe coverages – get client signature.

    iii) Recommendations > improvements to coverage – higher limits / all-risk.

    iv) Invoice > renewal premium.

    v) Advise Client > read policy / advise broker of changes or corrections needed.

    vi) Thank Client > for continuing to do business with you / confirm continued support.

6) Non-Renewal   

1. Client’s Decision    

i) Probe Reasons > pricing and service most common.

ii) Service > broker – note concerns, apologize, action plan / insurer – send feedback.

iii) Salvage Operation > amend insurance program / change procedures.

iv) Lost Renewal > thank client for past business / happy to help in future / document.

v) Pricing Concern > get permission to re-quote prior to next renewal / abeyance.

2. Broker’s Decision    

i) Reasons > price loyalty / insurer concerns with risk / unable to remarket.

ii) Notify Client > in writing 30 days prior to renewal date.

iii) Legal Obligation > advise client clearly no expectation of policy being renewed.

Endorsements

1. Policy Amendments > change terms, conditions / override provisions unless otherwise stated.
2. Issued > new policy / mid-term to change client coverage / at renewal.
3. Client Request > items – add, delete / limits – increase, reduce / new property / home business.
4. Insurer Request > reduce coverage to limit exposure – owned home to revenue property.

HANDLING PROCEDURES
    1) Document Request > notes – date, time, request / written notice to insurer.
    2) Update Files > address changes affect client profile / all other policies in portfolio.
    3) Clarify Request > confirm understanding / transmit clearly and concisely to insurer.
    4) When In Doubt > contact client to discuss before proceeding with endorsement.
    5) Bind Within Authority > if insurer’s confirmation required, advise client accordingly.
    6) Issue Binder > promptly confirm details in writing to client.
    7) Coverage Deleted / Reduced > ask client for written instructions before requesting.
    8) Documents Received > check for accuracy – coverages / data / effective date / limits.
    9) Premium > balance due – invoice / return – check client’s account before issuing refund.

PROPERTY INSURANCE ENDORSEMENTS
    1) Sewer Back-Up       

a) Arises On > new business / existing business – change to other residence.

        b) Policy Exclusion > back-up – sewers / septic tanks / sump pumps.
        c) Conditions > additional premium / larger deductible / lower limit.

    2) By-Laws       

a) Building Codes > municipal standards for construction – new / renovations.

b) Basis > Building Code of Canada / periodic review and updating.

c) Compliance > existing buildings – added to / renovated / repaired.

d) Affect > materials used / how work is done.

e) Policy Exclusion > insured’s additional loss costs due to operation of by-laws.

f) Covers > increased cost / undamaged portion – demolition, rebuilding / loss of use.

    3) Home Exchange       

a) Client > exchanges houses for specified time period with colleague.

b) Questions > relationship of parties? contents stored? collegue insuring on own?

c) Action > material change – reduced cover / quote cover – storage, tenants.

    4) Home Security System       

a) System Details > description / local or monitored / installation.

b) Premium Discount > certified (ULC) – alarm / installer / installation / monitoring.

LIABILITY INSURANCE ENDORSEMENTS    Extensions to property policies for exposures:
    1) Vacant Land > owned, rented, leased    / hazards – bodies of water / structures / uses.
    2) Graveyard Plot > owned property – check policy wording.
    3) Watercraft > ownership or operation / based on horsepower, length, style.
    4) Home Business > incidental business exposures / may need commercial (CGL) cover.
    5) Additional Insureds > request – person other than insured? who? why? reasons?

AUTOMOBILE INSURANCE ENDORSEMENTS
    1) Vehicle Storage       

a) Suspension of Coverage Endorsement.

b) Extended Time Period > reduced cover / premium savings.

c) Suspends > Section A – unless non-owned vehicle / Section C1 - Collision.

d) Sustains > Section B – as passenger or pedestrian / Sections C3, C4.

e) Ontario / Quebec > sustains direct compensation property damage coverage.

    2) Automobile Values   

a) Agreed Value of Automobile > vintage – appraisal = replacement cost / parts price.

b) Limit of Amount Paid for Loss or Damage > RV’s – lesser of ACV / stated amount.

c) Waiver of Depreciation > new – repair to new / pay purchase price / limited time.

    3) Family Protection Coverage    Underinsured Motorist / Family Security coverage:

a) Protects > insured / family when at fault driver has low Section A limit (minimum).

b) Covers > difference between Section A limits – insured’s / at fault driver’s.

    4) Loss of Use   

a) Covers > transportation costs while insured’s vehicle disabled by any insured peril.

b) Reimburses > specified $ amount – daily / maximum

    5) Non-Owned Automobile / Driver Coverages   

a) S.P.F. 1 (AB) > covers insured, spouse temporarily driving non-owned vehicles.

b) Endorsed > extended period / allowing others to drive without consent of owner.

c) Physical Damage > resulting from liability assumed under contract (rental auto).

Premiums
PREMIUM    Amount of money an insurer charges to provide insurance coverage.

1. Total Of > limit of insurance X rate (cost of unit of insurance for one year).
2. Personal Lines > computer generated based on classification factors / limits.
3. Client Motivation > save money v. inferior product or service.
4. Customer Retention > competitive premium + appropriate risk protection / good service.
5. Quote Discrepancies > increase deductibles / restricted cover (explain!) / pursue other markets.

Payment

1. Due > on coverage becoming effective / no grace period.
2. Prompt Collection > incentives – link to commissions / penalties – charge broker unpaid 60/90.
3. Methods > direct bill – client pays insurer / broker bill – broker remits premiums to insurer.
4. Trust Account > deposited / earn interest (30 – 60 days) / remitted to insurer less commissions.

PAYMENT PLANS        Customer service and satisfaction v. need and ability to pay:

1) Direct Billing   

a) Insurer > automatic monthly withdrawals from insured’s account.

    b) Deposit > 60 days earned premium + service and interest charges.

    c) Ensures > appropriate advance premium on account if cancellation.

    d) Basis > annual premium paid < 10 months of inception = downpayment next term.

    e) Withdrawals > designated date – late installments discouraged / limited in #.

f) Advantages > equal installments / proper earned if cancelled / insurer handles A/R.

g) Disadvantages > processing delays = large withdrawal / non-pay cancel.

h) Client Contact > explain thoroughly / maintain – newsletter, review renewal / claim.

2) Finance Companies   

a) Use > commercial accounts / high value personal lines policies.

b) Annual Minimum Premium > $5,000.

c) Specialist > CAFO.

d) Procedures        i) Finance Company > pays premium in full to broker.

            ii) Broker > remits payment to insurer.

            iii) Insured > pays finance company monthly (premium+interest).

e) Loan > unearned premium collateral / credit basis – policy type, industry, insurer.

f) Insured Rights Assigned > non-payment = short rate calculation.

g) Advantage – Insured > frees capital to invest in business = healthier cash flow.

h) Advantages – Broker > finance company handles A/R / earn interest on premiums.

i) Disadvantages > application process / small premiums disqualified / dissatisfaction.

j) Broker > selects reputable finance companies / maintains close contact with client.

3) Brokerage Plans   

a) Regulations > vary among provinces / arranged on new application.

    b) Structure > deposit 120 days earned premium / two short term installments.

    c) Invoice > premium amount / payment terms / service charge / overdue penalties.

    d) Post-Dated Cheques > last resort / recommend – direct bill, finance company.

    e) Other Options > cash / certified cheque / credit card / money order.

Cancellations        Provisions contained in policy Statutory (General) Conditions.

1. Insurer > in writing – 15 days registered, 5 days personal / last known address / refund pro-rata.
2. Insured > any time / to insurer’s provincial chief agency or head office / refund short rate.
3. Notify All Parties > insured / loss payee / mortgagees / certificate holders / assignee.
4. Non-Delivery > returned to insurer – must remained unopened on file as proof notification sent.
5. Cancellation Types        1) Flat > from inception date / no premium owing, refunded / no cover.

2) Pro-Rata > proportion of premium for unexpired policy term.

3) Short Rate > < proportionate part remaining unearned (admin costs).

INSURER INITIATES
    1) Non-Payment of Premium   

1. Requested By > broker – agency bill / finance company / insurer – direct bill.
2. Delinquent Account > premiums not paid on time / no response from insured.
3. Time On Risk > deposit / paid premiums enough to cover even with notice period.
4. Outstanding Premium > payment demand sent with registered cancellation letter.

    2) Underwriting Reasons   

1. Change in Risk > new items added / property – use, occupancy / auto - drivers.
2. Discovery > inspection / claim / request for policy changes.
3. Avoid Mid-Term > difficult to replace coverage, remarket / work with insurer.
4. Procedure > in writing / registered mail 15 days, personal delivery 5 days.
5. Return Premium > pro-rata / cheque must accompany cancellation notice.
6. Claims > covered until cancellation date.

INSURED INITIATES

1. Reasons > no longer require coverage / placed coverage through another insurer.
2. Signed Request > signatures of all named insureds / clear request / date and time.
3. Forms > original policy / cancellation release / letter requesting cancellation.
4. Automobile Insurance > return of pink card.
5. Return Premium > short-rate (earned quicker) less minimum retained (admin costs).
6. Lapse > insured cancels as of renewal date – written confirmation / policy returned.
7. Flat Cancellation > no premium charged if lapsed within 15 days after renewal date.
8. Abeyance File > short term – return of policy documents / signed authorizations.

Letters of Authorization    Written notice to insurer advising of broker of record on policy.
Broker of Record:         a) appointed by insured to handle all policy transactions.

b) responsible for all payments due on account.

c) receives commission.

d) client can appoint / replace at any time during policy term.

THE PROCESS

1. Insurer > receives letter of authorization.
2. Insurer > advises existing broker of receipt / gives time period to consult with client.
3. Existing Broker > asks client for reason / requests payment / closes file / abeyances.
4. Recovered Business > client promptly rescinds letter of authorization with insurer.

QUALIFY THE PROSPECT

1. New Business > ask why – referral / payment history – delaying, avoiding payment.
2. Mid-Term Authorization:   

1) Confirm Insurer > accepts letter of authorization before renewal date.

2) Confirm Insurer > will be offering renewal terms to the insured.

3) Remarketing > insurer accepts letter but doesn’t offer renewal.

4) Commission > new business $ stays with previous broker.

5) Premium > responsible for reduction and commission changes.

6) Review > familiarize self with file / offer client recommendations.

7) No Contract With Insurer > suggest client wait until renewal / abeyance to quote.

3. Recommend Another Broker > not preferred client profile / coverage outside expertise.

Policy conditions require reporting claims to your insurer, BI loss complicates quickly.