Policy Forms Compliance: Pitfalls to Avoid

Your company’s policy forms make up the legal contract between your company and its insureds.  Sounds important, right?  All too often, however, companies fail to give their policies and related forms the attention they deserve; using competitor or off-the-shelf forms that are a bad fit for their organization and/or delegating policy form drafting to persons within the organization lacking the necessary skills or experience to draft forms and contracts properly. Further, companies often take an ad hoc approach to policy forms, delegating the drafting of them to different persons or firms over time without the necessary consideration for the need for consistency to the extent possible. Finally, and perhaps most importantly, insurance laws (including case law precedents) change frequently and companies often overlook the need to put in place a process to review policy forms periodically to ensure they are up-to-date with those changes.

The Results?

Unintended Claims Consequences:

By law, unclear and/or ambiguous policy terms and conditions are interpreted against the company. As a result, poorly-drafted policy provisions and exclusions can result in paying claims your company would otherwise not have to pay. Therefore, it is essential to have your policy forms drafted by an experienced professional.

It is also essential to ensure that your policy forms are up-to-date with the latest law changes in the state(s) in which they are used. Policy provisions that become outdated due to law changes are unenforceable and attempts to enforce them could result in extra-contractual damages. On the other side of the coin, failing to include more favorable policy conditions and exclusions authorized by new legislation, new regulations, or recent case law holdings will unnecessarily inflate your company’s claims costs, putting your company at a competitive disadvantage.  

Unnecessary Administrative Costs:

As we know, policy contracts and forms differ from state to state as the result of state law variations. But can you say confidently that state law variations make up the sole reason for the differences between your state products? If your company takes an ad hoc approach to policy and forms creation and maintenance, your company’s systems costs, training costs, and other administrative costs may be driven, in part, by unnecessary variance between state products solely as the result of different drafting approaches taken by different drafters.

Lost or Delayed Revenue from Missing Product Rollout Target Dates:

Poorly-drafted, noncompliant policy contracts and forms will inevitably be disapproved upon submission. This puts the timing of your product rollouts squarely in the hands of state regulators who are notoriously slow in resolving the inevitable back-and-forth communications that follow disapproval. Your choice is simple: Get it right the first time or forego the revenue from missing your product rollout target dates. 

The Solution?

If these are points of concern for your organization, discuss your next product revision/ product rollout project with The Lawson Firm. Scott Lawson has decades of experience drafting up-to-date, compliant, insurance policy contracts and forms in ways that minimize your exposure to unintended claims consequences, reduce unnecessary administrative costs, and ensure a quick and smooth approval process.

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