PIANJ Commends Senate on Passing Measure Protecting Agents’ Books

The Professional Insurance Agents of New Jersey Inc. commended the state Senate for its unanimous passage of legislation to help ensure agents’ ownership and commission rights are continued when an insurance company transfers its policy obligations to a new company. Gov. James E. McGreevey is expected to sign the bill into law some time in July.

New Jersey’s ongoing auto insurance crisis created the need for such legislation, which appears to be the first of its kind. “In recent years, transfers of business have increased, including several companies that discontinued and transferred their personal automobile insurance business,” the PIANJ noted. “When an insurance company ceasing to write business finds another to assume its obligations to provide coverage, it will transfer policy information to the new company so it can offer additional coverage to policyholders.”

The PIANJ, under the leadership of immediate past president David J. Madara, recognized “that tremendous harm results when an insurance company is allowed to transfer policies to another company that refuses to recognize the agent as the owner of his book of business.”

Prior to the bill’s passage Madara stressed that “this bill preserves agents’ ownership rights. It doesn’t guarantee commission levels, and it’s not designed to guarantee [agents] full employment.”

The PIANJ explained, “Insurance agents build what is commonly known as ‘books of business’ or ‘renewal rights’ information about a policyholder, such as names, amount and type of insurance and the dates of policy expiration. This information is gathered by the agent who sells the insurance, at his own expense, and is used by the agent to service the business and renew coverage for his/her customer. Virtually all contracts between independent insurance agents and companies declare the agent to be the exclusive owner of this information.” Madara called this information “the foundation of customer relationships that take years to develop,” and added that without the protections provided in this bill, insurance producers are at risk of losing their most valuable assets when a company decides to transfer its business.”
Current PIANJ President John D’Agostino Jr. called it “perhaps the most important legislation PIANJ has taken on in recent years.” The bill passed Assembly by a unanimous vote in May.

Madara noted that the bill was narrowly crafted, and took into account changing conditions in the insurance industry, as more companies adopt a multiple approach to distributing their products—using independent agents, along with captive agents, direct writing and the Internet. “I hope it spreads across the country,” Madara concluded.

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