What Does a Personal Lines Insurer Have To Do With Remaining Policies When It Terminates an Agency?
Question: “One of our personal lines carriers is terminating our contract due to low premium volume. Is the carrier required to do anything regarding the policies we have left with them?”
Answer: Yes. They may have to renew some policies through your agency for up to three more years.
Subsection (j) of Section 3425 of the New York Insurance Law, titled Certain property/casualty insurance policies; cancellation and renewal provisions; agents’ contracts and brokers’ accounts, sets the rules for situations where a personal lines carrier is terminating an agency’s contract. Here is a summary:
Personal Lines Policies Other Than Auto
- Carrier must offer to continue the policy for any remaining part of the three-year required policy period.
- If the three-year policy period ends within one year of the carrier giving the agency the termination notice, carrier must offer to continue the policy through the terminated agency for at least the next one-year policy period.
- After that one year, if the insured requests, carrier must offer to continue the policy through the terminated agency for the last two years of the new three-year required policy period.
- If the three-year policy period ends more than one year after the carrier gave the agency the termination notice, the carrier does not have to offer to continue the policy through the terminated agency.
Auto Policies
- Carrier must offer to continue the policy for any remaining part of the one-year required policy period.
- At insured’s request, carrier must offer to continue the policy through the terminated agency for three successive one-year policy periods that commence within a year after the carrier gave the agency the termination notice.
- Carrier retains the right to cancel the policy for any reason within the first 60 days; to cancel for a reason permitted by law (nonpayment, driver’s license suspension/revocation, fraud/material misrepresentation); or non-renew up to 2% of policies in a rating territory each calendar year.
Other Requirements
- Carrier must accept all business meeting its current underwriting standards from the terminated agency for 120 days after giving the agency the termination notice.
- Terminated agency is entitled to receive commissions on the continued policies at the carrier’s prevailing commission rate for those lines of business.
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