The Uncertainty of Certificates
Brokers and agents are often asked by their clients seeking to win bids for business to certify coverages that aren’t in their policies, strike language in the standard certificate form to comply with contractual requirements or issue certificates that include additional insureds that are not named on their policies.
As these issues continue to simmer in the marketplace, a majority of states have enacted laws and regulations to limit problems arising from excessive demands, and making it illegal for agents and brokers to list verbiage on certificates of insurance that does not accurately represent what the policy covers.
The new state requirements are due in large part to extensive lobbying efforts by groups like the Independent Insurance Agents and Brokers of America Inc. in Alexandria, Va., said Bill Wilson, the group’s associate vice president of education and research.
“We didn’t do it to be punitive to agents, but rather to give them a reason why they can’t put certain wording on a COI if it misrepresents the policy terms,” Wilson said. “It’s illegal for them to do so, and that’s why they have to refuse.”
Problems often arise when “savvy” landlords, lenders, contractors and rental companies dictate specific insurance requirements that some agents and brokers “are just not familiar with, or are paying much attention to,” he said.
Susan McCaffrey, area vice president, senior client service manager at Arthur J. Gallagher & Co. in Kansas City, Mo., said she has encountered such problems when taking over accounts from other brokerage firms.
For example, a property owner might require a client to provide a workers’ compensation alternate employer endorsement to protect the owner if one of the client’s employees is injured on their property, McCaffrey said.
When the team reviews contracts that have already been signed and see requirements that aren’t currently covered, such as certain pollution, or errors and omissions coverage, they often have to secure that coverage at an additional cost. — Tim Gallagher, director of commercial lines, Marsh & McLennan
Most national carriers are willing to provide the required forms, but smaller or regional insurance companies are not as willing to provide the required forms or will charge a premium.
Barb Wurst, a client executive in the Minneapolis office of Marsh & McLennan Agency LLC, said her team sometimes encounters outdated verbiage cited from forms, such as the 1985 version of the additional insured form that is no longer used in the industry, or erroneous requirements that need to be clarified, such as a requirement to remove the care custody and control exclusion in the general liability policy.
“Reviewing contracts and the certificate of insurance requirements before the contracts are signed is critical to being able to negotiate with carriers,” Wurst said. “If we can review them before our clients sign the contract, it makes everything down the road go smoother.”
When the team reviews contracts that have already been signed and see requirements that aren’t currently covered, such as certain pollution, or errors and omissions coverage, they often have to secure that coverage at an additional cost, said Tim Gallagher, Marsh & McLennan’s director of commercial lines.
“That’s never a fun conversation to have with our clients,” Gallagher said.
Certificates of insurance are merely “snapshots” of policies, and should never be relied upon in the same manner as the actual policy, said Bryson Popham, managing partner in the Annapolis, Md., law firm of Popham & Andryszak.
Moreover, certificates can be rendered obsolete immediately following issuance, because the policies they describe can be cancelled the next day.
“The best a typical certificate can do is state that an insurer will ‘endeavor’ to notify a certificate holder when coverage is terminated, but again, that is little protection for the certificate holder,” Popham said.
“If a claim arises, however, the insurance company is bound only by the policy, not the certificate that someone else amended.” — Bryson Popham, managing partner, Popham & Andryszak
Sometimes an organization, such as a general contractor or a municipality, will require a firm wanting to work with them be named as an additional insured on the certificate, or require that the firm has special liability coverage, he said.
Occasionally, a bidding contractor may add the requested language on their certificate in order to win the contract.
“If a claim arises, however, the insurance company is bound only by the policy, not the certificate that someone else amended,” Popham said. “The best advice is to never amend a certificate — the only results will be bad ones.”
Third parties, such as quasi-governmental agencies, are increasingly using vendors to electronically process certificates of insurance for them, said Ellen Perle, chief counsel for regulatory law and licensing at Aon Risk Solutions in New York City.
Rather than being able to use ACORD forms or manuscript certificates that have been approved by states, brokers are pressured to download data into these vendor systems containing fields requiring only “yes” or “no” responses, and so may not always comport with the actual terms of the policies or the type of information subject to disclosure on certificates.
Sometimes brokers can’t input information in certain fields without first having to guarantee terms.
“On top of that, fees are often imposed on producers just to access the systems,” Perle said. “In addition to the regulatory hurdles and the resources and expense incurred by producers to use these systems, the potential for misuse or mistaken use of the data by others may also present a risk.”
Brokers Cheer NARAB Passage
After many years of intense lobbying, insurance agents and brokers finally have a national licensing clearinghouse.
Legislation signed into law by President Obama on Jan. 12 as part of the extension of The Terrorism Risk Insurance Act (TRIA) established the National Association of Registered Agents and Brokers (NARAB II) to make it easier for brokers to sell insurance on a nationwide basis.
NARAB II, commonly known as NARAB, was established as a permanent organization.
Proponents of NARAB, a nonprofit membership organization to be governed by state insurance commissioners and insurance market representatives, argued that the group will preserve the best of the state regulatory system while adding a more effective licensing system.
“NARAB means a much more efficient and streamlined licensing process for agents and brokers operating in multiple states,” said Brady Kelley, executive director of the National Association of Professional Surplus Lines Offices (NAPSLO).
“NARAB is a tremendous and effective reform while preserving the state-based regulatory system,” he said.
A National System
Keri Kish, NAPSLO’s director of government relations, added that currently its members, or any broker or agent, has to be licensed in their home state, but if they do business in other states they have to obtain a separate license in each of those states as well.
“There will still be stringent requirements to become a NARAB member. But once those requirements are met, it’s just a much more simple online, one-stop shop to get licensed nationally.” — Brady Kelley, executive director of the National Association of Professional Surplus Lines Offices
“With NARAB, what they’ll be able to do is get their license in their home state and then apply to NARAB,” said Kish. “If they’re approved for NARAB membership, then they would be able to operate on a national basis.”
Added Kish: “They would still have to pay the same fees so there’s not necessarily a reduction in fees they would pay to get the licenses, but it’s a huge reduction in the amount of time and ease of being able to operate on a national basis and not having to administer 50 separate licenses.”
Kelley noted that if the agent meets the NARAB membership criteria, they will be able to log onto the national system, meet the qualifications, submit a background check and receive a national license.
“There will still be stringent requirements to become a NARAB member,” Kelley added. “But once those requirements are met, it’s just a much more simple online, one-stop shop to get licensed nationally.”
John Prible, Washington, D.C.-based vice president of federal government affairs for the Independent Insurance Agents & Brokers of America (IIABA), said NARAB will help companies by increasing their distribution force across the country and it will help consumers by increasing competition.
“But also a point that should not be lost, and it’s actually a very important point, is that now more than ever consumers will not be tied to one location,” Prible said.
“People move around, they move from state to state, people buy second homes in different states and they might have businesses in other states as well. What this will allow them to do is to continue to rely on their trusted insurance agent no matter where their business or property is.
“So we anticipate that NARAB probably won’t go live for about two years. We want to make sure we get it right.” — John Prible, vice president of federal government affairs, Independent Insurance Agents & Brokers of America
“That agent or broker will be able to utilize NARAB in order to operate across state lines without having to get 50-plus different licenses from the various states in which they operate.”
NARAB is expected to increase competition among agents and brokers nationwide.
“The important reason competition will be increased is because now there will be a greater number of agents and brokers that consumers can choose from,” said Prible.
“Consumers don’t just have to choose among the insurance brokers and agents in the place where they’ve moved or where they expand their small business across state lines, they can keep their current broker.
“But if another agent comes in there and offers better service or better value, then they can move to them,” Prible said.
Joel Wood, senior vice president of government affairs for the Washington, D.C.-based Council of Insurance Agents and Brokers (CIAB), noted that “for all the histrionics over state-versus-federal aspects of the NARAB discussion, the reality is that NARAB is simply an administrative mechanism to facilitate multi-state licensure.
“It is a red-tape cutter that will save significant costs for agencies and brokers large and small,” Wood said. “I know of many small firms who employ full-time staff just to maintain all their firm’s non-resident licenses.”
IIABA’s Prible stressed that NARAB will not be up and running overnight.
“The single most important thing that we’re trying to tell our members right now is that even though we’ve been working on this for the better part of a decade and we’ve finally crossed the finish line, this is not just a switch that’s going to be flipped,” Prible said.
“The president is going to have to appoint a board of directors,” Prible said. “This board will have to meet and develop the bylaws for exactly how NARAB is going to work. So we anticipate that NARAB probably won’t go live for about two years. We want to make sure we get it right.”
Diversifying Top Management in Workers’ Comp
The panel at the inaugural Women in Workers’ Compensation (WiWC) Forum. From left to right: Eileen Ramallo, Elaine Vega, Nina Smith-Garmon, Nancy Hamlet, Michelle Weatherson, Nanette de la Torre, Danielle Lisenbey.
Across the country, the business community is engaged in a robust conversation about women being under-represented among c-level positions.
Why aren’t more women breaking into upper management roles? Does gender bias still exist? And, perhaps more importantly, what can women and men do to add more diversity to top leadership ranks?
Elaine Vega and Nancy Hamlet, of Healthcare Solutions, the Duluth, Ga.-based health services provider to the workers’ compensation and auto liability/PIP markets, have discussed the issue between themselves many times over the years.
The duo agreed that starting an industry-wide conversation would be an effective start to addressing the challenge. After three years of internal discussions, the inaugural Women in Workers’ Compensation (WiWC) Forum became reality. Judging by the attendance, content and feedback, it was an auspicious, very successful, debut.
Specifically, Healthcare Solutions and LRP Publications teamed up at the National Workers’ compensation and Disability Conference (NWCDC), held Nov. 18-21, 2014 in Las Vegas, to present the first WiWC event focused on the development of women as leaders within the industry. The WiWC debut featured a keynote speaker, a panel discussion and a networking cocktail hour.
“We believe this is just the beginning for the WiWC organization,” said Hamlet, senior vice president of marketing, adding that the event’s main theme was the conversation regarding challenges that still exist for women in the workplace is “current, real … and relevant.”
Originally the forum was allocated a room to hold 150 people. Vega and Hamlet worried about the room being too large, so they asked LRP what the contingency would be to make the room smaller if they couldn’t fill it. They needn’t have worried, as more than 400 women, and some men as well, registered and attended, requiring an even larger room.
“Clearly, the topic is relevant and there was plenty to discuss,” said Vega, senior vice president of account management.
Hamlet explained that WiWC was formed to create an open forum to promote a strong sense of community and support for current and future female leaders in the workers’ compensation industry. Going forward, the WiWC forum will provide insight and ideas with opportunities for members to:
- Engage … with accomplished industry professionals and build lasting relationships.
- Enrich … their knowledge base with tactical insights from speakers and panelists.
- Explore … opportunities and challenges facing women leaders today.
- Encounter … senior executives’ perspectives on leadership.
- Examine … leadership strategies and how to effectively apply the strategies.
- Empower … themselves and others to achieve success and groundbreaking results.
At the inaugural event, keynote speaker Peggy Holtman, co-author of “Leading at the Edge: Leadership Lessons from the Extraordinary Saga of Shackleton’s Antarctic Expedition,” discussed how a seemingly unconnected historical event can offer critical lessons on leadership in the workplace, especially for women looking to move into top executive spots.
After Holtman’s talk, a panel discussion, moderated by Vega, offered the perspectives of five workers’ compensation industry executives on ways in which women can navigate past the glass ceiling. Panelists included Eileen Ramallo , EVP Healthcare Solutions; Danielle Lisenbey, CEO Broadspire; Nanette de la Torre, VP Zenith; Nina Smith-Garmon, EVP Mitchell International; and Michelle Weatherson, Director, Claims Medical and Regulatory Division, State Fund of Calif.
The panelists discussed a wide range of topics related to women in workers’ compensation. For example, one topic focused on the need to take the big risks when it comes to moving past workplace barriers. Other topics included the importance of women in higher positions serving as sponsors and advocates for younger, less experienced women; and the impact of industry consolidation on women’s careers and how to best manage that change. Another topic was how women could best master conflict and emotions in the workplace.
“What’s clear is conflict has to be managed; it will not go away. It will only get worse,” said Healthcare Solutions’ Ramallo. “It then can create other rifts that won’t necessarily be visible immediately, but can have a very large impact. You have to be able to understand what it is early on from another’s perspective, why the situation exists, and then encourage and try to resolve a conflict situation, whatever may be driving it.”
In the wake of the first WiWC Forum, Hamlet noted that while there are countless general reports showing that women have not yet achieved equal representation in top leadership positions in the workplace, studies deal with averages rather than individual stories. And while women must continue to look at the data and work toward closing the gap, hearing from accomplished women in the workers’ compensation industry at NWCDC drove home critical messages on a person level.
Today, Vega and Hamlet are looking to expand WiWC to make it “truly owned” by the industry. For example, they expect to recruit companies interested in becoming sponsors, forming an advisory council, creating a charter and discussing future possibilities for the organization on both the national and regional levels.
“Much remains to be done, but I have confidence that we will come together and make the organization stronger so that it prospers for years to come,” Hamlet said. “After all, it’s clear that our industry is filled with talented women who can make things happen!”
Vega added that WiWC has already received requests to live stream the event in the future, so it will examine the feasibility of that option in an effort to be even more inclusive.
“We have a shared vision for improving opportunities for current and future women leaders in workers’ compensation,” Vega said. “It doesn’t matter our gender or our title, it’s all about supporting the greater vision. As was said several times at the event, this is just the beginning. We hope more women and men will join us in this continued dialogue.”
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Healthcare Solutions. The editorial staff of Risk & Insurance had no role in its preparation.