Do I own my book of business? What does my contract say? These are just some of the questions every Independent Agent must ask when entering into business with a carrier. The most important asset your agency has is the ownership of its book of business. Here at the Independent Insurance Agents and Brokers of Arizona (IIABAZ) we have gone to great lengths over the years to make sure our members are protected. We have put statutes in place that safeguard your book of personal auto business, and the National Big “I” has one of the best agency-company contract lawyers in the Nation ready and willing to help members review their contracts.
One of our greatest accomplishments at the Arizona legislature was back in 1987. At the time carriers writing private passenger auto policies who wanted to drop agents would do so by canceling the producer’s contract, and because it is illegal to cancel or non-renew private passenger auto policies the company would continue to renew policies and no longer show the cancelled agency as the “producer”. This resulted in the insurance company “taking” all the insureds from the agent.
In yet another scheme, some companies who wanted to leave private passenger auto insurance, or just no longer use independent agents, would simply no longer pay the agents commission yet the agency still had to service the policy holders. This left many of our members in the wind with clients they still had to service without being compensated to do so.
It was IIABAZ who ran legislation to fix this problem by implementing Arizona Revised Statute 20-1631 Section H (included below).
20-1631. Definition of motor vehicle; cancellation of or failure to renew coverage; limitations; limitation of liability; exceptions; insurance producers
H. If a consumer purchases motor vehicle insurance coverage from an insurance producer licensed in this state, the insurance producer that owns the policy expiration shall remain the insurance producer of record for that insured. In the event the insurer terminates the insurance producer's contract, the insurance producer shall continue to provide customary services to the insured. The insurer shall provide the insurance producer with a minimum degree of authority necessary to provide customary services to the insured and shall provide the same level of compensation for these services that were in effect prior to the termination of the insurance producer contract.
This statute protects agents who own their book of business by not allowing carriers to cancel contracts and no longer pay commission to the agents or cover the insured. However, in order for this statute to protect an agent they MUST own their book of business. This is what differentiates independent agents from direct writers.
Because of this, and many other reasons, it is vital that an independent agent carefully read the agency-company contract before signing. Knowing what the agency- company contract says is critical and an agent’s failure to do so could mean they are giving away the ownership rights of their book of business. Since contracts can be incredibly complicated the National Big “I” has created the Office of the General Counsel (OGC) which has an amazing lawyer on staff who will review an agent’s contract free of charge. You can also visit our National website to find a list of contracts that have already been reviewed. If the contract you are looking for is not listed please send an electronic copy to email@example.com for review submission to National.
The OGC handles members and state association requests on a broad range of legal and business issues, including reviews of contracts addressing agency relationships with carriers. The OGC also prepares memoranda and FAQs to assist members in complying with the complex legal requirements of federal laws and regulations that affect their agency and brokerage businesses. Protection of agents’ ownership of expirations and other key components of agency-company contracts is central to the activities of the OGC.
Being an Independent Agent is not an easy job, which is why we take pride in making sure you have all the tools available to protect the hard work you have done. If you have any questions please contact us at firstname.lastname@example.org.
Author: Lanny L. Hair, CIC, RPLU, ARM, AAI - Executive Vice President
Independent Insurance Agents and Brokers of Arizona, Inc., Phoenix