Critical Issue Report

Agent's work product

IIABNY warns companies to stop sharing agent's work with other agents

By Phil Zinkewicz

On July 31 of this year, the Independent Insurance Agents & Brokers of New York issued a press release with the following headline and sub headline: IIABNY to Insurance Companies: Stop Sharing Your Agents’ Work With Other Agents—Association “Stands Firm” in Defense of Agents’ Information Ownership Rights.

The press release went on to say: “The Board of Directors for the Independent Insurance Agents & Brokers of New York has called on insurance companies to stop giving customer data to insurance agents when a competing agent originally submitted the information. IIABNY responded to recent soft market practices where companies, after unsuccessfully quoting an account with one agent, have given information about that account to a competing agent who may have ‘better luck.’”

The release said also that this “inappropriate practice” prompted IIABNY to broadcast an e-mail message July 30 to insurance company executives, informing them of a recent policy statement adopted by the IIABNY board. This statement declares: “The basic tenet of the independent agency system is that the agent/broker exclusively owns and controls its policyholder list, its expirations and the work product.”

The authors of the e-mail—IIABNY Chair Neal L. Sullivan and Richard A. Poppa, the association’s president and CEO—reminded insurers that this information-sharing procedure is “not proper business practice.” The duo’s message asserted that the state’s oldest producer trade association “stands firm in its defense of agents’ and brokers’ ownership of client and policyholder information.”

Rough Notes spoke with IIABNY’s Poppa to get a clearer fix on the issues involved. “It’s the soft market that brings this kind of situation about,” said Poppa. “Let’s say that Agent A has been working with a carrier for a year or two to land an account—let’s say ABC Lumber Company. During that time, Agent A has acquired a significant amount of information about that account—number of employees, exposures to loss, loss history, etc. Naturally, to get a quote from the carrier, Agent A has to share that information with the carrier. For whatever reason—price, features of the proposal or terms and conditions—Agent A is unsuccessful. Now, if the carrier is speaking with Agent B on a particular day and says, ‘By the way, we’ve been trying to land ABC Lumber Company, but we haven’t had much luck, maybe you’d like to try,’ that’s one thing. But, if the carrier says it will give Agent B Agent A’s files, that’s the improper sharing of a work product.”

Poppa is quick to point out that not every carrier is doing this. For those who are, he says, often it is the result of sloppy business practices or a hunger for new business, rather than for any malicious reasons. “In fact, we received some immediate responses to our e-mail from carriers who wanted to assure us that they were not misusing agent information. But, the fact is that we have received some phone calls from our members to the effect that this is going on.”

What would happen if Agent A is after an account, is unsuccessful and Agent B knows it? Should Agent B go after the account on his or her own? “We know our agents are competing with each other and they should be,” says Poppa. “What we are objecting to is carriers encouraging agents, after one agent has done all the work on an account, to go after the business and use the first agent’s information.”

Asked whether such behavior on the part of carriers is illegal as well as unethical, Poppa said he believed so. “Of course, it depends to a great extent on the contractual relationship between Agent A and the carrier,” he says. “However, under New York agency law, specifically the ‘Yonkers’ decision, it is clear that agents own their expirations, their client lists and the work product as well.”

The case Poppa is referring to is The National Fire Insurance Company v. Sullard. The court’s decision, which came down in 1904, read: “Our opinion is that the plaintiff (the company) was not the owner of the expiration register, nor entitled to its possession and hence not entitled to enjoin the defendant (agent) from the use in any lawful manner of the information derived from the expiration register.”

If this case, which really created the basis for the independent agency system, can be used by agents to take action against companies that misuse their information, why don’t they?

“We have to look at the situation practically,” says Poppa. “If I am Agent A trying to write that lumber company and I believe my carrier has given my information to Agent B and I take action, I am probably closing the door on a potential insured and/or the carrier. Therefore, it’s not in the agent’s best interest to take legal action. We, however, as an association need to remind carriers that they need to behave legally and ethically. We believe it is up to us to raise the issue and that’s why we sent out the release and the e-mail.”

And, in its official policy statement, the association writes: “IIABNY’s policy is that any information, material, work product, prospective client information or any of the related material necessary to try to write a new piece of business is the exclusive property of the independent agent/broker that developed it. A carrier has no right to use any of that information, including prospective client information, for any purpose other than intended by the submitting agent/broker. A carrier should never provide to subsequent agent/broker information obtained by a different agent/broker for the purpose of the subsequent agent/broker marketing or soliciting that account. Further, a subsequent agent/broker should decline accepting specific prospective client information known to have been obtained by a different agent/broker, indicate to the carrier that the subsequent agent/broker does not believe that the carrier’s offer or distribution of such information is a proper business practice, and ask the carrier not to continue that practice.” *

The author
Phil Zinkewicz is an insurance journalist with more than 30 years’ experience covering the international insurance and reinsurance arenas. He was the insurance editor of the Journal of Commerce for a number of years, handling all their domestic and international supplements. In addition, he regularly writes for a number of London publications.