Canceling Current Policies Auto/Home

[flyeres]

Our independent life and health agency just started offering auto and home personal lines and we are new to that side of the business. How does it work when someone wants to get our of his/her current policy? Do they have to wait until a renewal date? Can they get a refund and get out of a policy earlier than the renewal date? If so, what is the penalty?

Thanks.

[pita3333]

I am in fear that rather than hire qualified personel who would be able to answer this basic question...you just jumped in and are planning on learning on the fly!

I sure hope you have good E & O with a low deductible...tho in truth I really hope you have a higher deductible so that you learn to hire good people!

Now...let me climb off of my soap box and give you the answer (but I still feel that I should invoice you for a consulting fee):

Depends greatly on a few issues:

First of which is ... is there a min earned premium? If so then no matter when it is cancelled by the insured the unearned will never be less than that amount.

What are the terms for cancellation for non-payment of premium? If they policy is on installments, your client can miss that payment which will automatically result in a NOC and then move coverage on that date. This typically avoids a short rate cancellation.

Otherwise, they can sign a LPR and/or return policy for a short rate cancellation.

Good luck with the rest of your education to the P&C side of the business!

[d's insurance store]

I'll try and make it really easy...pretty much in the Personal LInes arena, an insured can cancel at any time, usually requiring a signed request.

Some policies in the Personal Lines area are cancelled pro rate..that is a refund is computed based on the number of days insured. Other policies are cancelled on a short rate basis...that is a formula that 'penalizes' the insured for cancelling 'early' by charging for more than the time insured. The longer a policy is into earned premium, the less the penalty.

My unsolicited advice is to be very sure when you're cancelling mid term that you're really benefiting the policyholder in either rate or coverage, and be VERY sure the new company is going to accept the risk at the quoted premium. Every personal lines and commercial agent at some time in their early career has had the experience of thinking that they're making the client better off, only to have some unexpected risk aspect pop up or not fully understand the underwriting guides of the new company and have the newly placed policy crap out, only to leave the insured worse off than when the transaction started.

Make sure the agency takes advantage of ALL of the training opportunities available with your new P&C carrier. You guys present as experts in the life/health area....you want to present as professionally with the P&C stuff.

Good luck.

[plins]

Does your agency have a PL appointment with the carrier they're currently with? If so and they don't necessarily want to leave the carrier but just change agencies you can have the policies transferred with a signed Agent Of Record letter. That way you don't have to cancel and face possible premium changes or other disruptions.

[NewinSD]

I used to work for an insurance company and their procedure was to pro-rate refunds on personal lines insurance when cancelled mid-term. But, if it was the first year that the policy was in force they did a short-rate cancellation. I am really not sure if all personal lines insurance companies do the same...does anyone know?

[NYagent301]

check state statutes. some states protect the consumer to change anytime they want with pro rata cancellation.