Be alert for changes in your insurance carrier’s underwriting guidelines

In a recent polling question posed on Agents of America (, the question was posed relating to changes in the underwriting guidelines of insurance carriers.

Typically, these types of changes become more common as the market hardens. The responses clearly showed that the overwhelming majority of carriers have modified their guidelines in the last 6 months. In fact, only 1% of the respondents indicated that they have not seen any modifications or restrictions of the guidelines for either their personal or commercial lines carriers.

Why is this important from an E&O standpoint?

It appears that regardless of the marketplace (hard or soft), insurance carriers have been known to pursue legal action against one of their agents for overstepping the carrier binding guidelines. As the market restricts, there is no doubt that the level of activity in this area should intensify.

Example: the underwriting guidelines state that your agency is not allowed to bind a homeowners risk for a value of greater than $250,000. Your agency binds a $350,000 home and the home suffers a major loss. The carrier then brings an action against the agent for binding them to a risk that they would contend they do not write. There have been many E&O cases where the carrier was successful in this legal matter.

As the carrier underwriting guidelines change, it is critical that the applicable staff be notified of these changes as soon as possible. For agencies with a significant number of carriers, these changes can get overwhelming so providing this information in writing to each of the staff is recommended.

If your agency has an account that is outside of the guidelines, one option would be to contact the carrier underwriter to secure their approval. If they agree to allow your agency to bind the risk (even though it is outside of the guidelines), be sure to document this conversation (via e-mail or letter) back to the underwriter. You never know when this piece of documentation could come into play.

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