Agents: Between A Rock and a Hard Place

Last month, my agency hosted the Professional Insurance Agents of New York’s spring Long Island Advisory Council. PIA holds its Advisory Council meetings around the state twice a year. The meetings are a great source for the association to hear input from its members about the benefits and services it provides and to learn what issues members are dealing with every day. I’ve been involved with PIANY’s Advisory Councils for decades now—as a member, chair and host—and I know the information and suggestions PIA obtains from these meetings is invaluable. I also know that these meetings serve agents both as an opportunity to become more involved with the industry and the association, and as a sounding board for fellow members who attend them. One of the issues discussed during the meeting last month—certificates of insurance— was also brought up at every other PIA Advisory Council meeting around the state. This isn’t a new topic, it’s been a thorn in our sides for years, but everyone says the problem is getting worse. The stories range from ridiculous to sublime: In order to be considered for a job, general contractors and others in the contracting industry are being required by municipalities and corporations to produce certificates, which indicate coverages are in force that often are unreasonable and even unattainable. These requests are often made by attorneys or risk managers using boilerplate language that has little or nothing to do with the job at hand. They coerce the contractor to request a certificate from his or her producer that does not accurately reflect the coverage they’ve purchased. And clients don’t understand the problem—they just want the certificate to get the work. During the Advisory Council meeting, one agent even reported that a client, upon receiving his policy, told the agent it was not satisfactory and he wanted “only a certificate—don’t bother with the policy.”

As agents and brokers, we are programmed to provide value to our clients— the competitive nature of our business forces us to work harder than the lizards and cavemen in our industry and it’s our nature and obligation to do whatever we can to help our clients. This is particularly true on the commercial lines side of our industry. We are constantly seeking ways to help our customers be more successful in their business. This is one of the reasons it’s so frustrating when our customers ask us for a certificate of insurance that attests to coverages that may not be in force under their policy. We understand that our clients are being asked for these certificates by their own customers or prospects and they face losing business if they can’t produce them.

So, we are placed in an untenable position; faced with losing business for standing firm in our ethical and legal position when we refuse to provide a client with a certificate of insurance that fails to reflect the terms of the actual policy. But, our clients and their customers who request the certificates are not regulated by the New York State Insurance Department. There’s no authority to prohibit them from demanding improper certificates of insurance. It’s an awful position to be in, and agents hate it. But there’s good news: As timing would have it, PIANY has made great progress this month, on our efforts to obtain some legislative relief on behalf of agents and brokers. At PIA’s requests, Assemblyman Joseph Morelle, D-132, and state Sen. James Seward, R-51, worked with several industry groups and introduced a bill to set standards and penalties on the issuance of certificates of insurance. This bill would define certificates of insurance, establish standards for their use and give the NYSID authority to prohibit insurance buyers and third parties from making illegal demands of independent insurance agents. If successful, this bill will help clarify what certificates can and can’t do and offer producers much-needed protection.

PIA has been working on this problem for years and is not waiting for legislative relief. In addition to webinars and multiple QuickSource documents that provide guidance and tools for agents to educate their clients, PIA National and ACORD have committed to develop a series of education pieces to help people understand what certificates of insurance are used for, what they mean and most importantly, what they do not mean.

The Advisory Council members who have raised this issue with PIA should be proud.

Serving on PIA’s Advisory Councils is a great way to give back to an industry that has served so many of us so well. And, PIA benefits in many ways from the information it obtains and the leaders who move up through the organization from these meetings. It’s particularly nice, though, when you can see that our industry benefits too, from the input that comes directly from these meetings.