IRMI Update—Issue #182
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
April 23, 2008
In This Issue
Colleague,
Securing and providing evidence of insurance in compliance with business
contract requirements is a major problem for risk managers and agents/brokers
alike. The standard tool provided by insurers—the certificate of insurance—offers
its holder virtually no comfort or security. On the other hand, attempts by
certificate holders to secure a more robust promise often violate state insurance
code or Federal intellectual property law, or place agents/brokers in an untenable
situation of making promises that they are not in a position to keep.
Many insurance companies no longer issue certificates. Instead they delegate
that task to their agents and brokers with instructions to use a standard form.
Often insurers ask their agents and brokers to refrain from even sending them
copies. The agent or broker then encounters problems with requests for unauthorized
modifications to the standard form or demands that a special manuscript form
be used in its place. It's simply an errors and omissions claim waiting to happen.
This problem is not new—it was alive and well 30 years ago when I started
out as a risk management consultant. So why on earth, in this era of the Internet
and technological wizardry, is it still with us?
Here are a few thoughts on how an online system might work:
- The insurer sets up a web portal where certificates are requested online.
- The agent or the insured enters the certificate holder's information,
including a few basic specifics about the contract requirement (such as
required cancellation notice).
- The system automatically e-mails a certificate of insurance to the certificate
holder, insured, and agent. The certificate could contain all the normal
escape clauses to let the insurer off the hook.
- Also attached to the e-mail, if required, are applicable additional
insured endorsement(s) and an endorsement(s) promising advance notice of
cancellation via e-mail. The certificate's escape clauses won't apply to
these.
- The certificate holder's information is maintained to allow notice of
cancellation in the event this is necessary.
Naturally, there would be many details to implementation. But the bottom
line is: it's doable. Not doing so makes insurers appear out of touch with the
needs of their policyholders, the customers of their policyholders, and their
agents/brokers. Plus, think of the competitive industry advantage the pioneers
of such an easy-to-use, much-needed system would enjoy.
What do you think? Have you encountered significant problems with certificate
requests? Does it waste too much time and energy for everyone involved? How
would you solve the problems? Have you seen an E&O claim arise from certificates?
Please share your experience
and ideas on this topic.
Thank you for subscribing to IRMI Update. Please pass this issue along to
your colleagues with a suggestion that they sign up at the
IRMI Update subscription
page.
All the best,
Jack
Jack P. Gibson, CPCU, CRIS, ARM
President
IRMI
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"We have never had a loss of that type! Why should our risk management plan
have included it?"
Solution: Add a new dimension to your annual risk management funding plan—The
unknown loss or unplanned for event.
At the end of each year, see if that risk box has been used. If it has, add
a new known box to your master plan. Your unknown risk box can also be available
on a 3-year rolling average, to act as the "banker" should another risk fund
have a temporary short fall.
Now that we have added terrorism and ethics to our "known risk boxes," we
can only wonder what the next one will be.
By: Darrell Heppner, Commercial Lines Supervisor
Hub International of California
Pleasant Hill, CA
darrell.heppner@hubinternational.com
SUGGEST A RISK TIP: Send us a practical tip (less than 300 words) for identifying
and managing risks, buying insurance, managing claims, or filling gaps in insurance
coverages. Submit your
risk tips. We'll acknowledge your contribution as we did for Darrell.
The April issue of CICR describes in
detail Revenue Ruling 2008-8, where the IRS intends to treat each cell of a
protected cell captive (PCC) as a separate entity for tax purposes. Other articles
on PCC firewalls and the recently pulled tax regulation 1.1502-13(e) are also
included.
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rating plans and alternative funding options for your organization's risks.
See a detailed list of the risk
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