Read Fine Print On Contracts, Agents Urged
Agents have one major protection when it comes to their relationship with insurers–their contracts–yet many fail to read the fine print, association leaders lament.
Time and time again, according to association representatives, agents do not take the time to read and review contracts, and that's a big mistake, they say.
Some contracts are clearly written to the advantage of the company, and in some cases are just antiquated, said one agent association representative.
The National Auto Agents Alliance, based in Denver, has reviewed 100 contracts from various states, and while there are state laws to protect agents, some of these contracts still manage to strip producers of their protections, according to Jeanette Wickwire, who chairs NAAAs contract review committee.
"For independent agents to prosper, agents and companies need to work together, and that starts with the contract," said Ms. Wickwire, owner of All Texas Insurance Agency in Austin.
There are contracts that allow companies to terminate agents at whim, add hold-harmless indemnification, or allow for the change of commission at will, noted Ms. Wickwire.
In addition, some still retain "account current" clauses that put the onus on agents to collect premiums, even when the company does all billing and collecting, she said, referring to such provisions as antiquated.
Contracts can be negotiated, she noted. Admitting that this could be difficult for small agencies, which may lack much leverage with carriers, Ms. Wickwire said it still should be attempted.
The problem, she said, may be more a case of companies simply not updating standard contracts that they have been using for years, as well as agents not taking the time to review them.
"Dont be afraid to negotiate a point in a contract," recommended Kathleen Weinheimer, vice president of industry relations with the Independent Insurance Agents of New York in Syracuse. "You may have to go to the marketing representative, but dont be afraid to get it changed. It doesnt hurt to try."
The Alexandria, Va.-based Independent Insurance Agents of America, and a number of state associations, offer contract reviews, but emphasize that such services are not legal opinions. Agents need an attorney for that, they say.
Among some items that IIAA recommends looking for in a contract are:
Agent ownership of expirations and limits on company solicitations.
Circumstances and conditions for contract termination. Also, provisions for rehabilitation before termination under certain conditions.
Indemnification of the agent.
Provisions relating to how much time an agent has before a carrier withdraws business–preferably 180 days–and indicating that terms of withdrawal do not bypass termination provisions.
Conditions for contract amendment.
Commission, payment and billing terms.
"There are things companies do that agents have no control over, but there is one thing companies could do more of, and that is [to] dialogue with agents associations," said Rick Russell, executive vice president of the Professional Insurance Agents of Pennsylvania, Maryland and Delaware in Mechanicsburg, Pa.
"We can always agree to disagree with [their decisions], but [if] the parties can discuss the issue, that is always preferable. Dialogue is the basis of a good relationship," he said.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, August 6, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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