If you've fallen behind on the premium payments for your car
insurance policy, you're going to start getting nonpayment alerts
notices of impending cancellation
from your insurance company. But there's one person you probably
won't hear from on the matter: your insurance agent.
That's because agents aren't required to notify a policyholder
in the event of an impending cancellation.
"The parties to the insurance [policy] are the carrier and the
policyholder," explains insurance agent David Hulcher, an assistant
vice president of Agency E&O Risk Management at Big I Advantage
in Alexandria, Va. "State regulations require carriers [to have]
specific time frames and methods to notify policyholders of
cancellation. The agents are not a necessary party to this direct
In other words, letting you know that you forgot to pay the bill
is the responsibility of the insurance company, not the agent. Your
agent will probably receive a copy of the notice, and there's
nothing to preclude him or her from also giving you a heads-up. Yet
many will deliberately stay out of it, preferring to let the
insurer handle the task of informing you of your delinquency.
Hulcher, who is in the business of protecting the practices of
insurance agents, says that this decision is partly a matter of
limiting the agent's professional liability.
"The concern is really about taking on an additional duty that
is going to potentially raise the standard of care for customers,
which in turn increases exposure," he says. If agents get in the
habit of calling up their less-conscientious clients every time
they forget to send in their monthly payment, they run the risk of
establishing that as the norm. And that means that if the month
comes when the agent forgets to call with their usual reminder and
the client loses his or her coverage, that agent could be sued if
the client later gets into an accident and isn't covered.
But it's not just litigation that makes agents wary of calling
up delinquent clients. It's also the fact that they don't have time
to deal with it.
"They have customers who are late paying the bill all the time,"
Hulcher notes. "What if [the agent] didn't spend [their] time
constantly calling the 5 percent that's always late paying, and
spent that time prospecting for new customers?"
An insurance agent's job is to sell insurance, and if the agent
gets in the habit of handling the administrative duties of the
insurer, that's not good for business. Of course, losing clients
isn't good for business either, which is why some agents reach out
to policyholders who are on the verge of losing coverage.
Randy Hoffman, an agent with LA Independent Insurance in
Louisiana, takes the risk. "Normally we contact the insured as well
-- we'll send them one of our letters, or a copy of the
cancellation notice," he says. "It hurts us, too." He adds that his
agency has no problem sending repeated notices to clients who are
regularly late on payments.
Still, if you're routinely dropping the ball on your premium
payments, your agent may not be too sad to see you go. In a
recent message board discussion
between agents on the website of trade magazine
, some agents noted that it simply isn't worth chasing the
"You get them to pay one late premium notice and then they're
immediately behind on the next payment," notes one participant in
the conversation. "Often they generate very little in premium and
thus very little in revenue."