Independent Insurance
Agents and Brokers of Arizona, Inc.
333 East Flower Street - Phoenix, Arizona 85012
Phone: (602) 956-1851 / (800) 627-3356 Fax: (602) 468-1392
Web: www.iiabaz.com Email: [email protected]
Copyright © 2013; IIABAZ All rights reserved. May not be reproduced without written permission of IIABAZ.
DATE:
May 2013
TO:
IIAB of Arizona Members
IIAB of Arizona Associate Members
FROM:
Lanny L. Hair, CIC, RPLU, ARM, AAI—Executive Vice President
Amy Cronkhite —Governmental Affairs
RE:
CHAPTER ONE: Agency-Company Contracts WARNING!
CHAPTER TWO: Ownership of Your Book of Personal Auto Business
Bulletin # 11
CHAPTER ONE: Agency-Company Contracts WARNING!
NEVER, EVER, NEVER sign an agency agreement without first reading and understanding what you are
agreeing to.
If the marketing representative of an insurer appears in your office with an amendment to your agencycompany agreement and asks you to sign it on the spot, with the explanation that the amendment is truly
nothing to worry about...START WORRYING! If the amendment “did nothing” why would the insurer
bother developing it, and be in a hurry to have you sign it? Again, our National Association often times
already has reviewed proposed “amendments” to agency agreements, and that information can be extremely
valuable.
Since contracts can be incredibly complicated the National Big “I” has created the Office of the General
Counsel (OGC) which has an amazing lawyer on staff who will review an agent’s contract free of charge.
Please note: this could take several weeks if it has not already been reviewed. You can also visit our National
website at www.iiaba.net and click the Resources tab, then Legal Advocacy, and then Contract Review to find
a list of contracts that have already been reviewed.
The OGC handles members and state association requests on a broad range of legal and business issues,
including reviews of contracts addressing agency relationships with carriers. The OGC also prepares
memoranda and FAQs to assist members in complying with the complex legal requirements of federal laws
and regulations that affect their agency and brokerage businesses. Protection of agents’ ownership of
expirations and other key components of agency-company contracts is central to the activities of the OGC.
Once the situation has become “ugly” there is very little we, as an Association, can do. Your best legal
recourse is to seek private counsel and determine if litigation is a solution. In other words...our National
Association’s Legal Department cannot help after the genie is out of the bottle. They can, however, provide
you with a review of what agency-company contracts contain and allow you to make your own educated
decision on what to do.
CHAPTER TWO: Ownership of Your Book of Personal Auto Business
Do I own my book of business? What does my agency-company contract say? These are just some of the
questions every independent agent must ask when entering into business with a carrier. The most important
asset your agency has is the ownership of its book of business. Here at the Independent Insurance Agents
and Brokers of Arizona (IIABAZ) we have gone to great lengths over the years to make sure our members
ownership rights are protected as much as possible. We have put statutes in place that safeguard your book
of personal auto business, and the National Big “I” has one of the best agency-company contract lawyers in
the Nation ready and willing to help members review their contracts.
One of our greatest accomplishments at the Arizona legislature was back in 1987. At the time carriers
writing private passenger auto policies who wanted to drop agents would do so by canceling the producer’s
contract, and because it is illegal for an insurance company to cancel or non-renew private passenger auto
policies the company would continue to renew policies and no longer show the cancelled agency as the
“producer”. This resulted in the insurance company “taking” all the insureds from the agent.
In yet another scheme, some companies who wanted to leave the private passenger auto market, or just no
longer use independent agents, would simply no longer pay the agents commission even though the agency
still had to service the policy holders. This left many of our members in the wind with clients they still had
to service without being compensated to do so.
It was the IIABAZ who ran legislation to fix this problem by implementing Arizona Revised Statute 20-1631
Section H (included below).
20-1631. Definition of motor vehicle; cancellation of or failure to renew coverage; limitations;
limitation of liability; exceptions; insurance producers
H. If a consumer purchases motor vehicle insurance coverage from an insurance producer licensed in this
state, the insurance producer that owns the policy expiration shall remain the insurance producer of record for
that insured. In the event the insurer terminates the insurance producer's contract, the insurance producer
shall continue to provide customary services to the insured. The insurer shall provide the insurance producer
with a minimum degree of authority necessary to provide customary services to the insured and shall provide
the same level of compensation for these services that were in effect prior to the termination of the insurance
producer contract.
This statute protects agents who own their book of business by prohibiting carriers from cancelling agency
contracts and no longer pay commission to the agents. However, in order for this statute to protect an agent
they MUST own their book of business. This is what differentiates independent agents from direct writers.
Because of this, and many other reasons, it is vital that an independent agent carefully read the agencycompany contract before signing. Knowing what the agency-company contract says is critical and an
agent’s failure to know what they are signing could mean they are giving away the ownership rights of their
book of business.
Being an independent agent is not an easy job, which is why we take pride in making sure you have all the
tools available to protect the hard work you have done. If you have any questions, please contact Amy
Cronkhite in our office at 602-956-1851 or by email at [email protected].
Thank you for allowing us to be YOUR association.
This publication is intended to provide accurate and authoritative information on the subject matter covered and is distributed with the understanding that neither Independent
Insurance Agents and Brokers of Arizona, nor any contributing author or publisher is rendering legal, accounting, or other professional services and assume no liability
whatsoever in connection with its use.