Switching your client’s carrier? Don’t forget to tell the client

A Manitoba broker received a $250 fine recently for failing to advise a client that his policy had been moved to a different insurer until two weeks after the policy had expired.

In its decision, the Insurance Council of Manitoba found that on Jan. 1, 2019, an unnamed brokerage had cancelled its contract with Insurer A. [The decision does not name the insurers, simply referring to the original carrier as Insurer A and the new carrier as Insurer B.] An arrangement was made to “roll over” Insurer A’s book of business to Insurer B using the existing Insurer A file documentation.

At the brokerage, the client’s broker made a phone call on May 22, 2019 (about a month before her client’s policy was set to expire), to request the new policy from Insurer B. However, the broker neither put the file into abeyance until receipt of the new policy was confirmed, nor did she follow up on the application with Insurer B.

As a result, the client called the broker on July 4, 2019, to discuss the renewal of their policy with Insurer A, which had lapsed as of June 16, 2019.

iStock.com/Pattanaphong Khuankaew

The broker told the province’s broker regulator, the Insurance Council of Manitoba, that she had simply forgotten to create a reminder in the brokerage system to check to see if the policy from Insurer B had arrived.

“Normally, I would have contacted the clients to advise the switch in companies prior to the renewal date so that coverage limits, changes, exclusions, etc. can be discussed with them well in advance,” the broker wrote in a July 17, 2020 email to council’s investigators. “When [the client] contacted our office and I spoke with him, I apologized and explained the change from the [Insurer A] policy to [Insurer B].

“At this time, he did express some concern with coverage on jewellery and his deductible. I provided him with alternative options — i.e. scheduling the jewellery and/or cancelling the [Insurer B] policy and placing him with a different company to address his concerns.”

The client lodged a complaint with the regulator the next day.

“Section 3 (Quality of Service), of the Code [of broker conduct] indicates that agents or brokers shall serve their clients in a conscientious, diligent and efficient manner and shall provide a quality of service at least equal to that which agents or brokers would general expect of a licensee in a like situation,” the council wrote in its final decision on the matter. “An example of conduct which is found not to meet this requirement includes…failing to inform a client prior to renewal of a change of insurer and the reason for such change.”

In a July 18, 2019 email, the brokerage informed council that the procedure for changing carriers was to “roll over” Insurer A’s policies to Insurer B. “Once the [new Insurer B] policy is received by our office, we contact the client to discuss the transfer to [Insurer B] and the reasoning behind it. It would have been at this time that [the broker] would have reviewed all the coverage limits with the client, including any changes in coverage from the [Insurer A] policy to [Insurer B].”

The brokerage went on to explain to council that Insurer A “was behind on issuing our new policies for the rollover and we had not received the policy to date when the insured contacted our office. Due to human error, a suspense was not created to confirm that we either received the new policy, and if not, to ensure that we follow up on the application with [Insurer B].”

For its part, Insurer A told council that they “do not issue any lapse notification as it is the responsibility of the broker to manage the lapsed business.”

Feature image courtesy of iStock.ca/baona