Transcript CertificatesofInsuranceWebinar

Certificates of Insurance Webinar
Tuesday, July 19, 2011
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PIA National Certificates Webinar
David Eppstein, Assistant Vice President, Regulatory Affairs,
PIA National
Adam Felton, Director of Insurance Services, PIA Services,
Inc.
Ann Henstrand, Chief Compliance Officer, Government &
Industry Affairs, ACORD
Kristina Dixon, U.S. Risk Underwriters, Professional Division
Keith Savino, Chief Operating Officer, WRG Insurance and
PIA National ACORD Representative
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What is a certificate of insurance?
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A Certificate of Insurance is a document that provides information about
insurance policies
Millions of Insurance Certificates are issued every year, primarily in the United
States. The majority of certificates are issued upon policy renewal to provide this
information to third parties. These third parties are known as certificate
requestors/holders.
Certificates list one or more lines of insurance, the limits associated with those
coverages and the insurer providing the coverage
Every certificate must include the following 3 key provisions:
― Information Only Provision
― Policy Governing Statement
― Notice of Cancellation
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What is the problem?
• Independent agents are receiving demands from noninsurance entity 3rd parties to issue certificates that do not
comply with the underlying policy terms.
• This puts agents in a difficult position because they either
have to issue the flawed certificate or risk losing the business.
• Many departments have issued bulletins making it clear that
this practice is illegal and in some cases this has cured the
problem but in other cases these demands are still being
made.
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What is the Solution?
In 2008 PIA worked with other agent
associations, carriers, other interested parties,
regulators and legislators in Louisiana to help
craft a solution.
The legislation, along with the subsequent
regulation, issued by the department largely
resolved the problem.
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What does the bill do?
The legislation makes it clear that a certificate
is for information only and can not change the
policy terms. It makes it illegal to demand or
issue certificates that do not reflect the policy
terms and requires the forms to be filed and
approved by the department.
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Efforts in other states
Recognizing the success of the Louisiana
efforts we worked with our local PIA state
affiliates to help resolve the problems they
have. Several states have enacted, or are
considering enacting, legislation similar to
Louisiana.
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NCOIL Certificates Model
In an effort to bring certainty and uniformity
to certificates, the National Conference of
Insurance Legislators (NCOIL) is considering a
model that contains similar provisions as the
Louisiana bill. PIA supports the base model
and is working with the legislators on some
amendments to improve the model further.
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NAIC Activity
The National Association of Insurance
Commissioners (NAIC) has expressed some
renewed interest in this issue. We are hopeful
the regulators may consider issuing a model
bulletin that would complement the NCOIL
model.
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Lender Interests
Lenders have a legitimate interest in making
sure they have evidence that a property is
covered by insurance. In some cases, the
policy may not be available so what can the
lenders rely upon? The certificate of insurance
is not the proper document for lenders.
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The Binder
The certificate of insurance is NOT intended to
fully satisfy the needs of lenders. The binder
and/or the policy is. If the policy is not
available, the lenders should rely on the
binder as evidence of coverage.
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Liability vs. Property Coverage
We are attempting to resolve the problems
agents have with 3rd party demands for
certificates of liability coverage. The issue the
lenders have with evidence of property
coverage is separate. These are two different
problems requiring two different solutions.
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A Certificate of Insurance is NOT
an Insurance Policy
• No coverage is provided, endorsed, amended, extended or altered in any
way by the issuance of any Certificate to a Certificate Holder. Only an
endorsement, rider or amendment to the policy can effect changes in
coverage, such as Additional Insureds, Waiver of Subrogation or Loss
Payee
• Reference to a contract between the client and a third party on a
Certificate does not provide coverage. Such coverage is provided only to
the extent that it is contained in the subject policy or endorsed thereto.
• The right to receive notice of cancellation is only provided within the
policy terms and condition.
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Use Approved Forms
• 13 States Require Approval of Forms and this
proposed MBA form would need to be
approved by the department before it can be
used in those states.
• ACORD Forms are all approved in each state
where approval is required.
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PIA Supports ACORD
• The Proposed MBA Form would have to be
manually filled in
• PIA National CAN NOT support the use of the
proposed MBA form
• ACORD forms are compatible with automated
agency systems
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Agency Procedures
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What happens when agents get a request for a certificate?
Have agency procedures in place
Check with your carrier
When issuing certificates of insurance, insurance agents
should consider the following:
– What is the purpose of the certificate?
– What does your agency agreement with the carrier/MGA state? Do
you have the authority to issue certificates of insurance on behalf of
the carrier/MGA?
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• When issuing certificates make sure the appropriate
information is represented, e.g. type of insurance/coverage,
policy number, policy term, limits of insurance, carrier and if
applicable the appropriate additional insured is stated.
• Where can I get the Latest ACORD Forms?
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ACORD Highlights – Who We Are
• Association for Cooperative Operations Research and
Development.
• A global, not-for-profit standards development
organization.
• Membership-driven, serving insurance and related
financial service industries.
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ACORD Forms Improve Efficiency
• A single document that can be
used with multiple partners
• Reduces duplication of work
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ACORD 24: Certificate of Property
Insurance
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ACORD 25: Certificate of Liability
Insurance
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Why do brokers and agents issue
Certificates of Insurance?
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Their Client requires certificates of insurance because:
• They are the tenant in a building, and owner is requesting evidence of
liability insurance
• They are the mortgagor of a building, and owner is requesting evidence of
property insurance
• They leased equipment and the owner of equipment wants evidence of
property insurance while equipment is in possession of our client
• They need evidence of workers compensation insurance in order to
obtain a contract to work for someone, i.e. security guard, temp services,
contractors entering job sites etc.
• Often the delivery of a certificate is time sensitive and is critical to the
completion of a commercial transaction
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What is usually included on a
certificate?
Date of issuance
Producer (agent/broker)
Insured
Insurance Companies providing the coverage
Type of insurance
Policy numbers, effective and expiration dates
Limits carried
Description of operations/activities to which the certificate pertains
Certificate holder/requestor
Cancellation provision
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Information Only Provision
• “This Certificate is issued as a matter of information only and
confers no rights upon the Certificate Holder. This Certificate
does not affirmatively or negatively amend, extend or alter
the coverage afforded by the policies below. This Certificate
of Insurance does not constitute a contract between the
issuing insurer(s), authorized representative or producer, and
the Certificate Holder.”
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Policy Governing Statement
• “This is to certify that the policies of insurance described
herein have been issued to the insured named herein for the
policy period indicated. Notwithstanding any requirement,
term or condition of any contract or other document with
respect to which the Certificate may be issued or may pertain,
the insurance afforded by the policies described herein is
subject to all the terms, conditions and exclusions of such
policies. (Aggregate) Limits shown my have been reduced by
paid claims.“
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30-Day Cancellation Notification
• Previous wording:
“Should any of the above described policies be cancelled
before the expiration date thereof, the issuing insurer will
endeavor to mail ____ days written notice…”
• Current wording:
“… expiration date thereof, NOTICE WILL BE DELIVERED IN
ACCORDANCE WITH THE POLICY PROVISIONS.”
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Only current editions of any
ACORD form can be used
• Older ACORD Certificates that have been withdrawn from our
forms library are obsolete and can be non-compliant. It is
imperative that all ACORD members to use the most current
and compliant versions of our forms.
• Any earlier editions of our forms that have been withdrawn
from the forms library are not kept up-to-date as to regulatory
requirements, and therefore should not be distributed for
use.
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ACORD Forms Availability
• ACORD.org – Forms Programs
– eForms
– Agents/Distributors/Brokers
– Insurers/Reinsurers
– Solution Providers
• Agency Management System Vendors
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ACORD Forms Programs
http://www.acord.org/standards/forms/
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PIA & ACORD
• History of Agents and ACORD
• Industry Participation
• Future Efforts
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ACORD Development Process
• Members Request New Standards
– Formal Process for a Member to Request a New Standard
– Reviewed By Member Leadership for Approval
• Working Groups Create Standard
– Once Approved Members Meet Periodically to Discuss and
Develop the Standard
• Final Draft Published
– Once the Development is Complete, A Final Draft is Created
• Membership Review
– Members Review and Discuss the Final Draft
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ACORD Implementation of
Development
• Publication of the Candidate Recommendation
– Once the Final Draft is complete, a Candidate Recommendation is
Published
– Implementation Testing Begins
– Several Candidate Recommendations Can Be Published Throughout
Testing
• Final Release
– Implementation Testing is Completed
– Final Discussion by Members
– New Standard is Published
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ACORD Maintenance Cycle
• Six Month Cycle of Maintenance
– Allows Members to Request Changes
– Members Review All Changes
– New Standard Published
• Why Six Months?
– Quick Support for Market Changes
– Allows Time for Each Change to Be Discussed and Evaluated
– Provides a Predictable Pattern for Changes
– Allows for Incremental Growth of Standards
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GET
INVOLVED!
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Have a question?
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