Guest Post: Reading Forms: Is It Really Necessary?

We are grateful for friend of the Academy, Chris Burand, President of Burand & Associates, LLC for this timely article. Thanks, Chris!

Now, let’s get to his question: Is it really necessary to read forms?

Of course not! Lots of people have made careers in this industry without reading forms or understanding the coverages they are selling.

I’ve met plenty of attorneys too who probably surprised themselves when they passed the bar. I know I have been surprised they have a license to practice law. Insurance forms are nothing but legal contracts so if attorneys don’t have to know contract law, why should agents have to understand the insurance contracts they are selling?

Plenty of truly incompetent people in many fields make good livings so being competent really is not a requirement. To some degree, professional liability insurance exists for these people.

Being competent is a personal choice. For some people, they are content to be incompetent if they can pay their bills. I have met many agents like this. I have met many E&O who attorneys advise agents to not be professional because as an amateur (if you are not professional you are amateur by definition), the standard of care is less and I have heard many agents ask, and even beg, for even lower standards of care so they cannot be held liable for their incompetence.
Some of the Insuretechs definitely want a low standard of care because their models are based on some combination of price and ease of use, not coverage. Several direct writers strike me similarly.

One particular area of incompetence that I have witnessed innumerable times is the inability and/or unwillingness to read policies and forms. A competent producer will read and endeavor to understand the forms they are selling so they can advise clients appropriately. An incompetent agent will not.

Some incompetent agents are fooling themselves too. They call the underwriters rather than reading the policy. This is foolish for many reasons:

1. Many underwriters have been so inadequately trained today that their opinion is usually of limited value. I hate to be so harsh having started my career as an underwriter. But with predictive modeling, some companies do not really need underwriters that know coverages.
2. With only a few exceptions where the underwriter has many years’ experience usually working for multiple companies, the underwriter will likely not know more than their company’s formats. Unless the producer gets an explanation from all their companies’ underwriters, one explanation does not work.
3. Believe it or not, not all policies and forms read the same. I know this comes as a surprise to many, especially those who do not read policies and therefore would not know that different companies’ forms read differently, but material differences actually exist.
4. Are there shortcuts to reading the whole boring policy(ies)? If all policies were the same, one set of cliff notes should suffice. But that is not the case. An agent can read examples relative to specific forms but all case law is based on the actual contractual wording. If the contractual wording in a contract is materially different, that case law may not apply!
5. A common question I get is, where can I research this coverage rather than reading the forms? Since the coverage varies based on the form, one might want to read the form.
6. Another comment/question I get is, I like researching coverages on Google. What are your thoughts? Does Google actually have an analysis of the form you are selling? If not, other than extremely basic data, one might want to read the form.

Reading and understanding the forms is part and parcel of being a professional agent. Being a professional agent is a personal choice. It is your choice. What choice will you make?

Chris is a frequent contributor to Insurance Journal and the Academy of Insurance. He has recently published his annual State of the P&C Insurance Industry report. You can find it on the Research and Trends page here.

Topics Agencies Underwriting