By Richard Giroux - The tightening of commercial insurance markets could soon have an impact on professional liability insurance for brokerage firms.

We recently noticed that some firms have become involved in situations in which clients faced sharply higher premiums or simply became "uninsurable", leading to potential complaints and/or legal action against brokers.

Since we already know that certain risks in brokers' portfolios could lead to such problems in the current market, these situations are avoidable if brokers are proactive and anticipate negative events.

Unfortunately, some brokers could end up vulnerable if they act too late, often out of fear of losing a client. But there's no room for procrastination in these situations!

Keep in mind that if you wait until the last minute to notify clients that you are unable to insure them or that they face a much higher premium, the risk of losing them is even higher!

Here are a few recommendations aimed at avoiding potential complaints or legal action.

• Get out your list 90 days in advance and look for any policies coming due that might cause difficulty in terms of renewals or major premium increases.
• You should determine at least 30 days in advance whether or not you can renew the policy. Otherwise, you are responsible for following up and confirming the insurer's intentions.
• As soon as an insurer informs you that a given situation could prove problematic, you should advise the policyholder immediately, preferably in writing (or as part of a recorded conversation) and should specify what steps you will be taking. This is aimed at ensuring that policyholders do not end up without coverage and that they have a reasonable period of time to look for new coverage.
• Keep in mind that you will usually be considered liable if you do not give clients enough time to find alternative coverage.
• Try to relocate the risk if possible, but be sure to ask yourself whether it is ultimately worth it. Some risks may be dangerous for your portfolio and may have a direct impact on profitability (loss frequency, difficult clients, etc.).

Also remember that brokers are not obliged to insure clients and that you can always end your mandate if you have reasonable cause, i.e. you are unable to find a market, trust has been lost, you have a difficult relationship with the client, etc.

Clients who are given plenty of notice of potential difficulties might be annoyed but they will have a hard time criticizing you if you have been transparent and upfront with them.

Even though you may demonstrate good will when dealing with clients, you sometimes simply have to accept the fact that no policy renewal is worth losing sleep over or having your career undermined.

Excerpts from the Code of ethics of damage insurance representatives

1. A damage insurance representative must carry out the mandate accepted by him in a transparent manner.
2. A damage insurance representative must, without delay, follow up on the instructions that he receives from a client or notify him that he is unable to do so. He must also inform his client of any impediment to the continuation of his mandate.
3. The fact that a damage insurance representative acts contrary to the honour and dignity of the profession constitutes a breach of the Code of ethics, including: […]

               (4)            failing to report on the carrying out of any mandate;

               (5)            failing to act with integrity towards his clients.