Carrier Rating Notifications. What responsibility does an agency have to notify clients of carrier ratings?
On new business, it is a good idea to list the carrier’s rating. However, if the carrier has an A.M. Best rating of less than B+, it is wise to provide a special disclaimer and offer higher rated carriers as options. One might even consider having the insured sign-off if they choose the lower rated carrier.
Furthermore, if an insured has a contract requiring their carrier have a minimum rating, then the agency needs a copy of the contract to be sure the carrier’s rating meets ALL the requirements. Contracts may specify the financial stability rating, the insurance company’s size rating, and even who the rating company must be (commonly seen in insurance agencies’ own E&O policies).
Midterm downgrades may need to be handled differently. Many courts have ruled that agencies have a duty to notify insureds if their carrier encounters known financial instability or is downgraded. This means notifying them at the time of the downgrade, not at renewal. This is obviously even more important for bonds.
Sometimes a low rated or not rated carrier will try to convince agents such notifications and sign-offs are not important. They are of course looking out for themselves. The best E&O practice is to protect the agency, not the company.
Topics Carriers
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