The Professional Insurance Agents of New Jersey Inc. commended the State Senate for its unanimous passage of legislation to help to ensure that agents’ ownership and commission rights are continued when an insurance company transfers its policy obligations to a new company. The Governor 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, CPCU, AAI, recognized “the tremendous harm that 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.” In a telephone interview 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 that “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.”
He explained that he was moved to action when, as President of the PIANJ, he was contacted by a 72-year-old independent agent, who had spent 41 years building up his book of business with Harleysville Insurance, only to see it evaporate when the company sold its New Jersey auto business. After considering filing a lawsuit, or seeking new regulations, Madara determined that direct legislation was the best course to follow.
Current PIANJ President John D’Agostino Jr., CIC, called it “perhaps the most important legislation PIANJ has taken on in New Jersey in recent years. The bill passed the Assembly by a unanimous vote in May. It’s prime sponsors were Assembly Banking and Insurance Committee Chairman Neil M. Cohen (D-District 20) and Committee member Christopher “Kip” Bateman (R-District 16) in the Assembly and Senator Stephen Sweeney (D-District 3) and Senate Republican Leader Robert Singer (R-District 30) in the Senate.
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. These evolving conditions make it even more imperative to ensure the rights of independent agents to their books of business. “I hope it spreads across the country,” he concluded.
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