by Jeff Yates, ACT Executive Director
In recent years, the electronic interactions occurring between agents and carriers have become a much more important part of the relationship, and thus, the technology agreements running between the parties also have become more important. Unfortunately, these agreements today run the gamut in the issues they cover and the approaches they take, and typically have not kept up with the emerging electronic relationships between the parties.
Independent agents, for their part, are not likely to be fully aware of all of the agent-carrier technology agreements their staffs have agreed to. With regard to those agreements they do know about, they are unlikely to be able to sort out the important commitments they have been asked to make from the rest of the complicated, software-related provisions.
For all of these reasons, ACT thought it was very important to develop its latest report, Guidelines for Effective Agent-Carrier Technology Agreements, to encourage the development of agreements that reflect the needs of both agents and carriers and to increase the parties’ understanding of what is expected of them as they interact with their business partners. This report was developed by a work group of agent and carrier business people who are on the front lines of implementing new technology solutions for their agencies and companies. The group also received valuable input from the IIABA Contracts Task Force and IIABA Legal Department. The report is available on the ACT web site at www.independentagent.com/act.
In order to promote increased understanding and compliance by the parties, ACT encourages that these agreements be kept as simple as possible and that their focus be on the key principles, and that detailed instructions be handled using separate procedures documents. The parties should also make sure that only authorized parties within the agency commit to these agreements. If online agreement technology is used, then the carrier should make it very clear that only authorized representatives of the agency can commit to them. Similarly, agencies should make sure their staffs understand that they are not authorized to commit the agency to such technology agreements. It is also very important for the agency, after it reviews its commitments in these agreements, to implement the requisite policies to assure that the agency complies with these requirements and to train its staff on these policies on an ongoing basis.
One of the key principles in technology agreements is to spell out each party’s responsibility to assure that only current, authorized personnel access the carrier’s web site. An agency systems administrator should actively manage the logon privileges for that agency, and agency procedures should ensure that the access of former personnel is terminated immediately. Agency personnel should be instructed to keep their passwords confidential and not share their passwords with any other party. This principle is also fundamental to the agency’s protecting the security of its own systems and safeguarding the privacy of its customers.
Some of the information on carrier web sites is intended for only agency viewing and not for sharing with other parties, while other information is available to agents to use freely for marketing, underwriting, loss control, etc. The technology agreement and carrier web site should clearly spell out which types of information and data fall into each category. Agents should continue to have the same rights to use client and policy data that they have traditionally had when they accessed this information in a non-electronic manner. Some current technology agreements imply differently, when they state that the carrier “owns” all of the software and content constituting its web site, and that the agent may not share this content with a third party, or requires specific permission to do so.
Probably the best example as to where the agreements have not kept up with evolving agent-carrier practices is the provision which provides for the termination of access to the carrier’s electronic client and policy view as soon as there is an agent of record letter or the agent’s relationship with the carrier terminates. Meanwhile, carriers have been “turning off the paper” to their agents and have been encouraging them to rely instead on the electronic information found on their web site or accessed from the carrier’s systems through the agency management system.
Technology agreements must provide agencies with explicit protection that they will have continued access to client and policy data (covering the period when they were the agent on the risk) for no less than the period of time that state law requires them to retain such information, even if another agent takes over the business through an agent of record letter, the agency is terminated, or the status of the carrier changes (is acquired, withdraws from the line of business or state, or becomes insolvent). The report goes into more detail as to how this information should be provided to the agent.
Technology agreements are likely to continue to take the position that each of the parties is largely responsible for errors and problems occurring to their own systems as a result of the actions of the other party or its systems (such as sending corrupt download files). Therefore, each of the parties should take reasonable steps to protect their own systems from such damage. ACT believes these agreements should also contain a provision where both parties commit to use reasonable efforts to resolve data errors and systems problems affecting the other party on a priority basis, since both parties are totally reliant upon their systems to do business.
ACT believes this approach to handling systems problems is preferable to the unequal indemnification provisions found in some technology agreements today, where the carrier specifically disclaims any indemnification for damage it causes to the agent’s systems, while requiring the agency to indemnify the carrier for damages the agent causes to the carrier’s systems. If indemnification is included, it should be a balanced provision that provides the same protection to each party.
The ACT work group did feel that agents should be able to rely on the client and policy data residing on the carrier’s web site, just as they have been able to rely on the information contained on the paper policy or communicated on the phone by a carrier employee. The group felt that the carrier should continue to indemnify for such incorrect information that the agent relies upon and which subsequently causes a loss.
These are just some of the key issues discussed in the ACT report. The technology agreements that are developed should respond to the needs of both agents and carriers in a balanced manner and avoid complex and arcane language. The challenge for those drafting these technology agreements is to draft them in a manner that increases agency understanding of what is required of them and gives them assurances that using these new carrier electronic services is a positive move for the agency to take—rather than a move that puts the agency at greater risk.
Jeff Yates is Executive Director of the Agents Council for Technology (ACT) which is affiliated with the Independent Insurance Agents & Brokers of America. Jeff Yates can be reached here. This article reflects the views of the author and should not be construed as an official statement by ACT.