Why Should We Update Our Policy Forms?
By Melissa Stream, Underwriting Consultant
Insurance policy forms are a critical component of the operation of any insurance company. The insurance policy is a legal contract between the insurer and the insured. Using improper or outdated insurance forms could have serious consequences. As a reinsurer, we encourage our client companies to use current industry standard forms. While the old forms have been used successfully for many years, there are many important reasons to update them now.
Meeting Policyholder Expectations
Your policyholders expect your company to offer the latest coverages. The updated policy forms have numerous coverages and coverage extensions that the old forms do not provide. By updating your forms, your company can make these available to your policyholders so they have what they need and want. Ultimately this helps your company stay competitive and helps give your company a future. Otherwise, you could lose key policyholders.
If you change a definition or a word, this can impact your entire policy and may have unintended consequences. The updated forms have wording that is consistent with the base policy and all the endorsements and coverage parts. Since any ambiguity or unclear wording is often decided in favor of the insured, your language must be exact. Many of the optional endorsements you may use do not flow with the other manuscript non-industry standard forms and have language conflicts that could potentially be construed as ambiguous.
Independent adjusters may not be familiar with unique, outdated or non-industry standard forms. This may make claims handling more difficult and time consuming.
Case law is available on current industry standard forms (AAIS and ISO) but none is available on other outdated, non-industry standard or hybrid forms. This may make the policy language of the new policies and forms more defendable in the courts. Also, as new case law is made, it is based on the current industry forms and can be beneficial to your company in determining if a claim is covered or not.
Many industry resources have valuable forms, underwriting and claims information. However, their materials are based on current industry standard forms such as the current AAIS and ISO forms. By using unique, outdated or non-industry standard forms, your company will be unable to make use of these resources.
The current forms are developed and maintained by organizations that do this on a full-time basis. They have an experienced staff dedicated to products and forms development. Policy forms must use commonly accepted language, yet keep pace with the latest regulatory directives, court rulings and market demands. These technically sound forms are regularly reviewed and revised to ensure that they are current and competitive with those of market leaders.
The organizations that produce and maintain the current policies and forms offer various education resources on their forms. These are generally available for free. These materials may not flow with the other forms and may have language conflicts. In addition, it is difficult for others (state associations, reinsurers, continuing education providers) to put together educational seminars based on unique or outdated forms. WRC has also hosted educational sessions on newer endorsements as well as agent training for those companies that have updated to AAIS forms and endorsements.
Another point to remember is that even if your company is using the most current forms from AAIS (such as the 2008 edition of the homeowner program) you also want to ensure you’re using the most current set of mandatory and amendatory endorsements. Keeping up with the flowcharts will ensure that you are using the most updated forms and endorsements for correct policy construction.
Flowcharts for all states can be found on the secure WRC website or the AAISdirect website. Keep in mind that obsolete forms and endorsements will be withdrawn by WAMIC in a few years. Any forms developed by WRC will only be compatible with the most current AAIS programs.
If your company would like more information on what needs to be done to bring your policy forms up to date, please contact Melissa Stream or Sherry Taylor.