In this hard market, carriers are taking drastic steps to reduce the financial stress they are experiencing and some of those steps directly affect independent insurance agencies and your clients. Many carriers are freezing new business, taking significant rate increases, modifying coverage forms and deductibles, halting new agency appointments and some are even terminating agency relationships.
If you find yourself in a situation where one of your carriers is terminating your appointment, as an independent agent in Ohio, you have certain statutory and contractual rights with your carriers. Every agency agreement is different so it is important that you spend time reviewing the termination provisions of the agreement. A best practice is to catalogue the key termination provisions for all of your agreements in one place. That way you can quickly reference how each company treats a potential termination. The common contractual provisions include – advance written notice, with and without cause termination provisions, what happens to clients and binding authority of the agency.
In addition to the contractual rights, the Ohio Revised Code provides certain protections to independent insurance agencies with their carriers. Here is a summary of those protections:
- Applies to every contract between a P&C insurer and independent insurance agent for every contract in effect for more than two (2) years.
- 180 advance written notice.
- Notice must include specific reason for termination of the agent and sent certified mail.
- During the 180 notice period – an agency may not write new policies unless approved by the carrier. An agency may renew or effect any necessary changes or endorsements of outstanding policies of insurance that are in force prior to termination notification.
- Prohibited Reasons for terminating a contract:
- Claims experience of the agent in a single year:
- Claims experience due to catastrophes of nature covered by a policy;
- Claims experience under uninsured and underinsured motorists coverage.
- Appeal Process – An agency may file an appeal with the Director to determine whether it is in compliance with the law.
- Upon receipt of this appeal, an insurer shall provide the Director and the agency with documentation in support of the insurer’s stated reason for termination.
- The Director shall promptly investigate the allegation. If the Director reasonably believes the carrier violated the statute, the Director shall conduct an adjudication hearing within thirty (30) days and make a final order.
- All final orders are subject to judicial review.
- Non-renewal and Cancellation of existing policies – An insurer shall not cancel or non-renew any policy of insurance written through an agent upon the sole ground of the termination of the agency until the expiration of the policy term or the twelve-month period following the effective date of the termination of the contract of agency, whichever is earlier.
- Exceptions – These protections do not apply to an agent whose license has been suspended or revoked by the DOI, exhibited gross incompetence, or whose contract is being terminated for insolvency, abandonment, gross or willful misconduct, or failure to pay an insurer.
If you find your agency facing a carrier appointment termination, we encourage you to reach out to Jeanie Giesler, OIA’s Resource Center Advisor, to advocate for your and help you better understand your rights in the process. To view the complete Carrier Appointment Termination Process Guide, click here.