Know Your Binders. Improperly written binders are one of the most significant exposures agencies have to being sued by their own carriers so knowing how to write binders correctly is imperative. One of the issues is binding authority has become more complicated, while simultaneously as many agencies’ staff’s knowledge and education of binders is materially regressing. It is my finding that many agencies’ staff today have less knowledge of binders than staff and producers had 10 years ago.
Some simple rules apply. One reason binders are more complicated and agency personnel have less knowledge is because binding authority is often now electronically sent. This makes changing binding authority easier and easier to ignore, not distribute, file and never review. Regardless of how binding authority limits are distributed, agencies are wise to verify every person with authority to bind has a current copy and acknowledges having read their copy. A review should be done annually just to make sure the files are up-to-date.
A key point here is that reviews are more necessary now because not all companies use the same 30 day binding authority limits as they have historically granted. So it is not just the policy limits that need review, but the days permitted too.
A second simple rule is that binders not be extended. This is less of a problem than it used to be as many agency management systems protect agencies from themselves. The extensions permitted in these systems actually create a new binder, which is proper because few carriers allow true extensions.