21 Mar Your Carrier’s Underwriting Guidelines – Have They Changed?
The quick answer is: Yes, they do, and the appropriate staff must be advised of those changes.
Typically, these types of changes become more common as the market hardens. I would surmise that this has also become more of an issue due to Mother Nature and the catastrophes (floods, wildfires, etc.) occurring. I recently saw a survey indicating that many carriers have modified their guidelines in the last 6-12 months. Certainly, one area where underwriting guidelines/underwriting appetite has changed is Cyber, where carriers are tightening things up.
Why is this important from an E&O standpoint?
Regardless of the marketplace (hard or soft), insurance carriers have been known to pursue legal action against one of their agents for overstepping the carrier-binding guidelines. As markets restrict their guidelines, there is no doubt that the level of activity in this area should increase.
Example: the underwriting guidelines state that your agency cannot bind a homeowner’s risk for a value greater than $250,000. Your agency binds a $350,000 home, and the home suffers a major loss. The carrier then brings an action against the agent for binding them to a risk they would contend they do not write. There have been many E&O cases where the carrier was successful in this legal matter.
As the carrier underwriting guidelines change, the applicable staff must be notified as soon as possible. These changes can be overwhelming for agencies with a significant number of carriers, so providing this information in writing to each staff member is recommended.
If your agency has an account outside of the guidelines, one option would be to contact the carrier underwriter to secure their approval. If they agree to allow your agency to bind the risk (even though it is outside the guidelines), document this conversation (via email or letter) back to the underwriter. You never know when this piece of documentation could come into play.