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Carriers Respond Favorably to PIA's Input on ACORD 25

Controversy has developed recently as the new ACORD (25) Certificates of Insurance form was fully implemented. As developed by its ACORD carrier working group,...
December 21, 2010

Controversy has developed recently as the new ACORD (25) Certificates of Insurance form was fully implemented.  As developed by its ACORD carrier working group, the new form removes old wording that carriers would "endeavor to" notify third-party certificate recipients of the policy's cancellation. The new language in the ACORD 25 certificate provides increased clarity by stating that notifications "will be made in accordance with policy provisions."

It now appears that, despite a 12-month lead time transition, some carriers were not prepared to convert to the new form either from a systems change standpoint and/or had only recently reviewed the form and expressed reservations about the new language (as well as the old language).

As a result, two issues erupted: one on the wording and flexibility of the new ACORD form, and the second was, despite the form, the unintentional effect of some carriers' newly revised instructions to their contracted insurance producers on the issuance of CERTs.

PIA Attends ACORD Session, PIA BIC Issues Guidance

On the form language and implementation, ACORD hosted an industry gathering in New York on December 6 to discuss the matter. PIA National Senior Vice President Patricia A. Borowski attended and shared PIA's perspective on the issue, as defined by the PIA National Business Issues Committee (BIC) which subsequently issued a guidance memo to PIA affiliates and members.   Since that meeting, ACORD is making good progress in securing a successful "fix" with a draft revision already out for working group comments.

The information from this BIC education piece was also shared with carriers, along with PIA's offer to work with carriers that had questions or concerns as they considered their revised underwriting instructions for their producers.  This was particularly important for those carriers that had already issued revised instructions without benefit, and in advance of, the ACORD meeting and/or PIA's guidance memo.

The core (unintentional) error these carriers made in their revised instructions transferred their contracted insurance producers issuing these compliant CERTs from on behalf of the carrier, to having the producers act independently and on behalf of the named insured, the producer's customer.

But, PIA's as well as many others' efforts are making progress here, as well.  Several carriers now realize the unwitting confusion their wording created and have voluntarily withdrawn these incorrect instructions, and are working with their insurance producers, PIA and others to create clear and balanced revised instructions that comport to standing insurance law and practice.

Chubb Rescinds Memo, Works With Producers

For example, on December 15, Chubb rescinded a communication it had sent to its producers earlier in the month.  In doing so, Chubb advised:

"Recently, we issued a communication regarding ACORD Certificates of Insurance and Notice to Third Parties.  Since that time, we have received constructive feedback from many of you regarding our approach. Based on that feedback and ongoing industry developments with Certificates of Insurance, we are re-evaluating our position on this issue. Please continue to provide us with your feedback as we work towards a mutually acceptable solution that addresses the recent changes in the ACORD certificates."

On behalf of PIA members, we thank Chubb for being open to both hearing and quickly acting upon their contracted insurance producers' and PIA's suggestions, and continuing to work through carrier-producer processing issues.

Background from PIA National Business Issues Committee

Certificates of Insurance for any purpose began as unique forms issued by individual carriers designed to provide a limited amount of policy insurance data to listed third parties, at the request of and on behalf of their named insured.

"Only an insurer may decide if any information from any of their issued policies may be shared with any others that are not a party to the policy, except as expressly and specifically required in law or by court order," said PIA National Senior Vice President Patricia A. Borowski. "Only an insurer may decide what form may be used to communicate such information about their policy on behalf of their insured."

"As a regular practice, insurers have granted contracted insurance producers permission to engage such accommodating services, but only on behalf of the insurer and in accordance with the insurer's underwriting and processing instructions," Borowski said.

What It Means to Agents: PIA's position is clear: insurer-contracted insurance producers, be they brokers or agents, may only act on behalf of the insurer in conveying policy information to a party that is not otherwise the named insured.  It is the carrier that either directly, or through their permissions to their contracted insurance producers, conveys policy information on behalf of the named insured. And it is the producer that conveys this on behalf of the insurer.

When insurers attempt to "assign" their contracted insurance producers to act on behalf of the named insured in the issuance of certificates of insurance, they are actually setting up a serious conflict of interest.

Click here to read PIA National Business Issues Committee Guidance Memo (12/13/10)

Click here to read PIA National Participates in ACORD Session on Certs and ACORD-25