The Fight for Policy Ownership

There are times when what agents don’t know can hurt them, and this is one of them. I refer to the all-too-often overlooked, and recently targeted, ownership of policy “expirations” – policy, policyholder and account information. At the crux of this issue is the guiding tenet of the independent agency system: independent agencies own the policies they write. They are the principal asset of an agent’s business and their livelihood.

Agents must be vigilant. Any threat to usurp that ownership is a threat to the foundation of the independent agency system and to agents’ business. It should be taken seriously – and confronted aggressively.

A Gradual Erosion of Ownership Rights?

For years, our organization has reviewed agency agreements, sometimes as a favor to carriers, other times as a benefit to member agencies. Last April we initiated a new approach to the process that provides an overview of the core provisions producers should expect to find in an agency agreement, an explanation of the purpose of such provisions and examples of alternate language when provisions do not reflect industry standards or fail to protect agencies’ interests. One of the most significant provisions is an agency’s ownership of expirations.

The new analysis has prompted members and carriers to submit a greater number of contracts for review. And as we’ve poured over agreements, we’ve noticed a common theme: While most contracts recognize the agency’s common law ownership of expirations, many include language in other parts of the agreement that infringes upon that right. Some agreements are simply silent on the issue.

Whether these are simple oversights, the result of an increasingly complex regulatory environment or the sign of a growing threat is unclear. But two things are clear: 1) Agency owners are insurance experts, not attorneys. They may not fully comprehend the contracts they sign or do not feel empowered to address them, or in some cases simply do not read them. 2) Failure to address such a vital contractual component as policy ownership is a danger to the future of the agency owner and, to a certain extent, to the independent agency system as a whole.

The Threat Affects Other Relationships

Beyond agency-carrier contracts, we’ve seen others that also impede upon independent agencies’ ownership rights. One is with wholesalers. The already complicated relationship between agencies and the wholesalers they use to broker business is a breeding ground for contractual confusion. It’s not uncommon for agencies to sign agreements blindly – or not at all. Of those agreements signed, at issue once again is ownership of expirations. Unless ownership is defined clearly in the contract, a wronged agency seeking recourse will face an uphill battle.

The ownership infringements we see most often with these agreements are the lack of restrictions for wholesalers to use account information for marketing purposes (which typically leads to direct solicitations from the wholesaler without the retail agencies’ approval – or knowledge) and the lack of restrictions on the expiration list following termination of the agreement. Both of these are dangerous in practice and in principle.

A Call for Vigilance

This multifaceted threat to agents’ ownership of expirations must not be taken lightly. If left unaddressed, over time it has the potential to upend the founding principle of the independent agency system.

Agents must stay vigilant, mind their rights and speak up when necessary. And they can look to their agents’ association for help. This is an issue worth fighting for. And because I know the strength and perseverance of independent agents, I know this is a fight we will win.