What Are An Insurance Agent’s Responsibilities To The Insured?

A recent caller to the IIAG Free Legal Service Program that I operate (1-800-IIAG-911) raised this question in the context of determining the value of buildings that are to be covered by a property and casualty insurance policy.  In particular, the caller wanted to know if it was his responsibility as the insurance agent to determine the value of such buildings.  The answer to this question, as well as to any similar question regarding the duty owed by an insurance agent to the insured, will depend on the nature of the relationship between the agent and the insured in question.  The nature of that relationship is established by what the agent by words, conduct, or both leads a reasonable insured to believe the agent will or can do for the insured.

As a general rule, an insurance agent is considered to be the agent of the insurance company, authorized by it to deal with potential insureds about obtaining insurance policies issued by the company.  As such, an insurance agent owes a primary duty to the company and has no duty to the insured.  However, almost 40 years ago, the Georgia Supreme Court recognized that an insurance agent could also become the agent of the insured by agreeing to perform a service for the insured that was not included within the services it was expected to perform on behalf of the insurance company.  In that case, the agent agreed not only to obtain a particular type of insurance coverage for the insured, he also agreed to examine the annual financial statements of the insured to make sure that the coverage was sufficient.   

By agreeing to make such a determination for the insured, the agent created a duty to perform that service in a non-negligent manner.  Thus, the answer to the question posed by my caller is that he had no duty to determine the value of the buildings that were to be covered by an insurance policy, but he could create such a duty by agreeing to make that determination, instead of asking the insured to tell him or her what amount of insurance coverage they wanted and obtaining a policy in that amount.

It is easy to see how an insurance agent in the course of normal business activity can “cross over the line”, so to speak, and create a duty to an insured that did not otherwise exist.  The appellate courts of Georgia have ruled on many cases involving lawsuits filed by insureds against their insurance agents who made promises about what they would or could do and then did not do so to the satisfaction of the insured.  So be wary of what you tell an insured you will or can do for them, because whatever you say you will or can do, you will then have to do in a non-negligent manner.  Just one more reason to always document all your communications with an insured.  You never know when something you said or did will come back to haunt you.

Ways to Improve Efficiency Through Technology

If you are like me, most of your working time is spent just trying to get the work done, without much thought to how the work can be done more efficiently.  In this increasingly complex technological society, it pays to take time out to review your agency’s work processes and find out if there are software programs, apps, or other technological fixes that could improve those processes.  I recently came across a blog post by Ben Page, an insurance agency owner, that talked about 10 relatively well known technologies that can be used to improve an agency’s operating efficiency or reduce its operating costs.

Some of Mr. Page’s suggestions seem obvious after you stop to think about them (e.g., e-signature services that allow for documents to be signed electronically and webcams that can be used for virtual meetings with customers and co-workers and when combined with an online meeting service the meetings can be conducted from anywhere in the world).  Others were more surprising (e.g., the use of dual monitors can increase productivity anywhere from 10 to 20 percent for employees who have to work in multiple programs simultaneously and online personality profile tests that have been customized for the insurance industry to assist in the hiring process). 

Two of Mr. Page’s suggestions, switching to VoIP telephone service and Google Apps, were mentioned in a previous blog post as great tools to make your agency more local and more mobile.  VOIP telephone service can simplify communications among your different offices and provide your customers with one telephone number that will work for all the offices.  Mr Page also points out that such a telephone system can automatically record and store all the calls made on it, which can be useful from an E&O and training perspective.  Google Apps can help streamline your agency’s operations by putting information and documents on the “cloud” and thus, allowing access to the same information and documents by your employees no matter where they may be located. 

Another way to provide access by all an agency’s employees to the same documents and information is to create an office intranet, which is essentially a website that is accessible only by the employees.  Like any website, you can put whatever information, documents, and programs you may want on it for your employees to use.  Mr. Page found it especially useful to keep his agency’s processes and procedures manuals up to date by allowing for change to them when necessary, which change was then instantly available to all his agency’s employees .

His number one technology fix was an improved sales management system, but he had no specific program to recommend.  Only what such a system should be capable of doing.  Click here to read what Mr. Page had to say about that subject, as well as his other technology suggestions.


Affordable Care Act – Update

As most of my readers may know by now the Obama administration has decided to delay the implementation of the “pay or play” provisions of the Patient Protection and Affordable Care Act until January 1, 2015.  Of course, this happened the day I left for vacation and right after I posted an article about those provisions.  But the delay in implementing them does not change the comments I made in my previous post about them.  It just gives insurance agents and their business customers another year to determine the best course of action for either providing health insurance to their employees or assisting them with obtaining such coverage through the insurance exchanges that are to be created under the Act.  The penalty for failing to provide such coverage remains in place for those employers who have the equivalent of 50 or more full-time employees and more than 30 true full-time employees (see my previous post for why this is the most important number for employers), its enforcement has just been delayed for a year.

As noted in the announcement of this delay, the remaining provisions of the Affordable Care Act that were set to begin on January 1, 2014 will still begin on that date.  The most significant of those provisions are the ones that establish insurance exchanges for those people who do not have health insurance coverage and create subsidies to assist those  who make less than 400% of the federal poverty income level for their family size in paying for such coverage, which, at least for now, they will still be required to have come January 1, 2014.

In recognition of this fact, on the day after the delay in enforcing “pay or play” was announced, the Georgia Insurance Commissioner’s Office adopted emergency regulations regarding the licensing requirements for anyone who wants to act as a “navigator” to assist people in using the insurance exchanges.  As indicated by Commissioner Ralph Hudgens in his speech to the IIAG annual convention, these requirements closely follow those for obtaining a license to sell health insurance.  Although the statute enacted by the Georgia legislature in its 2013 session, which required that “navigators” be licensed, authorized the Insurance Commissioner to exempt persons from taking a license examination “based on the applicant’s experience and qualifications”, neither the emergency regulation adopted nor the proposed final regulation that is now set for a hearing on July 30, 2013 provide for any exemptions from taking the license examination.

For the reasons I have described in prior posts about the role that insurance agents can play in assisting people with obtaining health insurance coverage under the Affordable Care Act, it appears counter-productive for the Insurance Commissioner to require that agents who are already licensed to sell health insurance be required to take a license examination to become a “navigator”.  This appears to be an unnecessary obstacle for those agents who want to take advantage of the opportunities presented by the Affordable Care Act.  If you agree, you should submit your comments about this omission in the regulations to the Insurance Commissioner’s Office by the July 30 hearing date for the final regulation.

Affordable Care Act – Are You and Your Customers Ready?

Exactly three months from today, on October 1, 2013, the insurance exchanges called for by the Patient Protection and Affordable Care Act, otherwise known as Obamacare, are supposed to be open for business and another three months later, on January 1, 2014, the requirement that most individuals have health insurance coverage takes effect.  The good news for small business owners, including insurance agencies and their customers, is that if you employ 30 or fewer full-time employees (those who are normally expected to work an average of 30 or more hours a week), there is no penalty for failing to offer health insurance coverage for all your employees, even if when part-time employees are counted the business has the equivalent of 50 or more full-time employees (the threshold for the “pay or play” requirements of the law).  The reason for this is that the penalty for failing to provide such coverage if you are required to do so is waived for the first 30 full-time employees.  This quirk in the law also allows an employer who has 30 or fewer full-time employees to provide health insurance coverage for its employees without having to worry about whether that coverage provides “minimum value” and is “affordable”, as those terms are defined by the law.

The penalty waiver in the law creates a perverse incentive and an opportunity for small employers who can take advantage of it, as they can relieve themselves of the cost of health insurance coverage and rely on the health insurance exchanges to provide such coverage for their employees.  Even larger employers may decide to go this route if the cost of the penalty is less than the cost of providing the required type of health insurance coverage under the law.  Many commentators are predicting this is what will happen.

The opportunity for such employers arises from the fact that employees whose employers don’t provide the type of health insurance coverage required by the law and who meet certain income standards are eligible for federal tax subsidies to help them pay for their own health insurance coverage through the insurance exchanges and the employer can supplement those subsidies by providing funds to its employees to pay for health related expenses.  Employees who earn up to 400% of the federal poverty level annual income threshold are eligible for the tax subsidies.  That means a family of four with an annual income of up to $94,200 would qualify for some amount of assistance in purchasing health insurance coverage through an exchange.  It is easy to see that a lot of employees will be eligible for such assistance.  Under some circumstances, this will permit employers to enable their employees to obtain health insurance coverage through the exchanges that is equivalent to or may be even better than what the employer was previously providing at  the same or lower cost to the employee (after taking into account the tax subsidy and employer provided funds) and at much less cost to the employer.

The difficult part for employers will be trying to determine whether the above best case scenario or something close to it is achievable for them.  That is where insurance agents and brokers can play a significant role, not only for the employer, but also for their employees who will need assistance navigating through the insurance exchanges.  As noted in previous posts on this blog, the agency responsible for implementing the new law, the Center for Consumer Information & Insurance Oversight, has indicated that it sees insurance agents and brokers playing a vital role in assisting both employers and their employees in dealing with its requirements. (Click here for my latest post and here for the latest information from the CCIIO on this subject.)  The Small Business Administration has created a website that provides information about the requirements of Obamacare as they relate to employers from sole proprietors through those with 50 or more employees, and the Internal Revenue Service has issued a FAQ sheet that is devoted to questions about how the “pay or play” provisions of the law work.