Producer Contract Terminations

As printed in the February 1st issue of "Illinois Insurance," the bi-monthly newsletter of the Illinois Department of Insurance, the Illinois Insurance Code prohibits an insurance company from terminating a policy of property & casualty insurance on the grounds the producer's contract has been terminated (215 ILCS 5/141.01). In addition, 215 ILCS 5/141.02 gives the insurance producers the right of renewal for one policy period following termination of the producer's contract from the company. Upon the expiration of this one-time policy renewal, the policyholder will either be assigned to an in-house account or another producer contracted with the insurance company, provided the policyholder continues to meet the insurance company's underwriting guidelines.

The Department of Insurance is aware that some insurance companies continue to send out renewal policies to policyholders that show the terminated insurance producer as the producing agent. This is erroneous information. Insurance producers have brought to the Department's attention that this practice could lead to E&O claims as the former producer lacks the ability to properly service the policy. In addition, the producer does not receive any commission for any policyholder service needs. Insurance companies are advised to institute procedures to ensure the insurance company lists the proper insurance producer on contract renewals. This, in turn, will allow policyholders to contact the proper producer for future policyholder service needs on policies where the producer has been terminated.