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21ST CENTURY POLICY FORMS

21ST CENTURY POLICY FORMS

21ST CENTURY POLICY FORMS
January 04
09:43 2021

With fewer program revisions being adopted more quickly, agents and brokers will be seeing fewer differences in edition dates, but will be encountering more policy provisions crafted individually. Learn more here.

21ST CENTURY POLICY FORMS

Fewer versions with more variations

By Joseph S. Harrington, CPCU

What do you think of when you learn that forms for a line of insurance are being completely revised? Are you thrilled at the prospect of updated coverages, or dismayed over the effort needed to learn and implement product changes most of your clients will not even notice?

It may be hard to imagine now, but there was a time not long ago when insurance producers had a stake in seeing that their carriers often updated their policy forms. That’s because, from about 1950 to around 1990, most changes to personal and commercial policy forms added new coverage or expanded existing coverage. The slower a company was in updating its forms, the less competitive its products would be.

…[W]ith fewer program revisions being adopted more quickly, and with carriers able to modify forms more easily, agents and brokers will be seeing fewer differences in edition dates, but encountering more policy provisions crafted individually.

Things started to change in the mid-1980s, when liability insurers suffered a crisis in capacity, and the early 1990s, when property insurers acted to curb their catastrophe exposure in the wake of devastating losses from Hurricane Andrew.

From that time on, program revisions were as likely to include restrictions of coverage as expansions of coverage. Insurers were not always quick to update their forms or adopt the most current versions released by the Insurance Services Office (ISO), the largest advisory organization serving the P-C business. Among other factors, carriers had to weigh the certain costs of updating company systems and operations against the prospective costs of new types of claims many of them had never seen and did not anticipate.

As a result, agents and brokers came to expect that different carriers would be using different versions of ISO and/or proprietary forms, and that they as producers needed to understand that two forms with the same number could provide a different degree of coverage, depending on the version.

Fewer, bigger changes

Bill Wilson, former head of the IIABA’s Virtual University and now an independent insurance commentator, recalls seeing a commercial package policy composed of ISO commercial property (CP) forms with three different edition dates and commercial general liability (CGL) forms with five different edition dates. That may have been an extreme example, but it was not entirely unusual at a time when ISO revised its CP forms seven times in 17 years and its CGL forms seven times in 19 years.

More recently, ISO has slowed the pace of its comprehensive revisions, even as it adds more and more new endorsements to address emerging exposures. ISO’s commercial property forms were most recently revised in 2007 and 2012; the CGL forms in 2007 and 2013.

“Major commercial lines revisions are not as often as they used to be,” Wilson says, adding that, because ISO program revisions are “less frequent and more important,” they are adopted more rapidly by carriers. According to Wilson, insurer adoption of ISO’s 2013 CGL program revision proceeded more quickly and broadly than most previous revisions.

“Today we typically make base coverage form revisions, on average, no more than once every five years,” says Kathleen D’Auria, senior manager of general liability products for ISO. “Introductions and revisions of endorsements happen much more frequently.”

She adds that “depending on the line of business and issues addressed by the related endorsements, such as emerging risk considerations and associated changes designed to provide more underwriting flexibility, our forms portfolio is updated in-between the base coverage form revisions.”

Rapid adoption of program revisions is facilitated by near-universal use of online delivery for forms and policy rating information. ISO itself provides rating information electronically and has developed its “Mozart” platform to help insurers incorporate the most current ISO forms and policy provisions into their proprietary programs.

Given that, producers can only assume that, with fewer program revisions being adopted more quickly, and with carriers able to modify forms more easily, agents and brokers will be seeing fewer differences in edition dates, but encountering more policy provisions crafted individually.

At least with that, more of the effort it takes to learn policy forms will be devoted to features designed by carriers to add value, and not to more or less duplicate provisions designed to be standard but not adopted consistently.

Joseph S. Harrington, CPCU, is an independent business writer specializing in property and casualty insurance coverages and operations. For 21 years, Joe was the communications director for the American Association of Insurance Services (AAIS), a P-C advisory organization. Prior to that, Joe worked in journalism and as a reporter and editor in financial services.

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