An insurance buyers' organization, while voicing support for New York's upcoming rule to require certainty of terms close to the inception of an insurance contract, is asking what penalties will be invoked for non-compliance.

The Risk and Insurance Management Society also said it wanted to see the regulation provide for buyer feedback.

RIMS' comments came after Thursday's announcement by New York State Insurance Department Superintendent Eric Dinallo that he is instituting a strict policy on contract certainty for brokers and insurers operating in-state in the next 12 months. In 90 percent of cases, the aim would be to achieve contract certainty within 30 days of inception.

RIMS said it is "eager to learn the next steps for the program, particularly how the New York Insurance Department intends to measure compliance and what penalties non-compliant companies can expect to face."

The organization said it is urging an evaluation program allowing insurance clients to provide feedback on whether providers meet, exceed or fall short of expectations.

A spokesman for the New York Insurance Department said in an e-mailed statement that if insurers and brokers cannot meet the requirements of the regulation in a year, "the department would consider regulations spelling out more detailed rules. Regulations have the force of law and penalties can be assessed on licensees."

"But we would prefer industry itself take the necessary measures towards attaining compliance in accordance with a principles-guided regulatory approach," the spokesman added. "The U.K. Financial Services Authority has attained notable success with contract certainty using this approach."

The message also said in part that the department believes client feedback is a good idea, and would be encouraged if the industry took charge of the project and kept it informed of their progress on any issues that they believe need to be ironed out.

Besides RIMS, the only party to comment publicly on the regulation so far is the Willis brokerage, which said it has long held the belief that contract certainty is one of the basic principles of service and should be adopted across the industry.

"There is absolutely no excuse for policies to be delivered months after their inception, an all-too-commonplace practice in this business," said Willis Chairman Joseph Plumeri.

RIMS said that in the wake of Mr. Dinallo's action, it expects other state insurance departments to also "take the initiative to reform the insurance placement process or, at the minimum, providers themselves will take steps to lead the process internally."

RIMS said it is ready to offer guidance to service providers seeking buyer perspective as they develop measures for meeting the contract certainty requirements.

Contract certainty is an issue at the heart of customer service deficiencies on the part of brokers and insurers, according to RIMS said.

The organization, which describes itself as the largest body of risk practitioners and commercial insurance buyers, said it is "grateful to Superintendent Dinallo for taking the necessary steps to tackle the issue, and hopes that providers will work speedily and aggressively to comply."

RIMS said that over the years, risk professionals have voiced increasing concerns about the lack of responsiveness and quality of services offered by insurance providers, which prompted the group in 2005 to develop its "Quality Program," to improve the service and delivery of insurance-related products to buyers.

The Quality Program has guidelines that are currently under development focusing on effective relationship-and insurance program-management.

RIMS also launched a Quality Forum, an annual meeting convening risk practitioners and CEOs and other top executives from the largest brokers and insurers, to discuss quality improvement in the insurance placement process. Forum discussion in some cases have allowed some insurers to develop internal programs to expedite the insurance placement process, RIMS said.

RIMS' "Quality Guidelines for Performance Expectations" are online at http://www.rims.org/resources/QualityProgram/Documents/QIP_Guidelines_ONLINE.pdf. Further information on the RIMS Quality Program is available at www.RIMS.org/Quality.

Special Reports /

RIMS Reacts To N.Y. Contract Certainty Regulation

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