Like well-drafted prenuptial agreements, technology agreements between agents and carriers need to address some key issues up front like what to do about agents' electronic access to company data when a relationship ends.

But termination issues are just one set of issues that need to be addressed in technology agreements, according to the report titled “Guidelines for Effective Agent-Carrier Technology Agreements.”

More importantly, the technology agreements need to address access, use and indemnity issues that can crop up to create problems in otherwise healthy ongoing relationships.

Whether technology issues are addressed directly in an agency agreement or through separate amendments, an overriding point to bear in mind is that there should be no conflict between the documents, according to the report. In other words, the principles and protections provided to the respective parties in an agency agreement cannot be taken away by the language of a technology agreement just because the agent happens to be using an electronic medium, the report said.

Roy Riley, chairman of the ACT Technology Agreements Work Group that produced the report, said it is intended to illuminate potential problemsand find remedies for them before they become issues for agents and carriers alike.

“We have not seen a problem nor do we know of one that has surfaced,” said Mr. Riley, who is also chief operating officer for Peel & Holland Financial Group, an independent agency based in Benton, Ky. “This report is more of an attempt to avoid one in the future.”

He said the report represented a broad set of viewpoints based on input from agency and company representatives. It is a guideline on general issues, he continued, and both producers and carriers need to keep the points the report makes in mind as they go forward in the future.

“These are good business practices that need to be addressed in the future,” said Mr. Riley.

Ken Clark, director in the Consultative Services Department for The Hartford, based in Hartford, Conn., felt insurance companies would view the report positively.

“The way the document was put together, it really gives carriers, I believe, a very balanced approach to items and functions that need to be included in any technology agreements,” observed Mr. Clark, who also served as director of the members of the ACT committee that put the report together.

“It's a balanced approach. It's not from a carrier side or an agent's side,” he said.

Mr. Clark described the report as “a guideline or road map” that can be used both by companies that do not already have technology agreements in place, as well as by companies that do have them already. As the technology changes, the latter group will need to make sure those changes are captured in the technology agreements.

According to the report, “the agreements reviewed were 'all over the lot' in the scope of issues that they addressed, and many seemed to be adapted from technology software agreements which did not take into account the unique aspects of our distribution system.”

Some of the key recommendations in the report included:

o Limiting Access.

The group felt that access to insurance company Web sites should be limited to authorized personnel and that an agency administrator should audit who has access to the sites. Companies should also perform audits to make sure password access is being protected properly by agencies.

Using Electronic Data, Other Carrier Information.

The report recommends that technology agreements clearly spell out the kinds of information on carrier Web sites that agents are allowed to use and share with customers and other parties (for marketing, underwriting, or loss control purposes, for example).

While the report said that some agreements do not adequately address the use of data today, others go overboard by stating that the carrier “owns” all software and Web content.

Addressing Termination.

Agreements need to be updated to allow agents to have access to company data on their clients and policies after termination from a company for the period specified by state regulators to keep records available. Allowing this, the report said, would generate support among agencies for carrier initiatives to “turn off ” the paper.

Indemnification.

There should be fair and equal indemnity agreements between insurers and agents for damages caused by technology systems. Current agreements hold agents responsible for damages either caused by them or limited to “the agent's 'intentional or grossly negligent' failure to adhere to the carrier's Conditions of Use of its technology.”

Also, electronic information should be as reliable as traditional forms of information. The same level of indemnity should apply from carrier errors as currently exists from traditional forms of information that results in an agent's loss.

Correction of Data, Systems Errors.

Each party should make a commitment to alert the other of incorrect information and make corrections as promptly as possible.

Document Retention.

Company rules on record retention by agencies should reflect state regulations that allow for keeping electronic records, instead of in paper format with the customer's “wet” signature. The agreements should also reflect how long those records need to be kept.

Third-Party Information Reports.

Carriers should not shift their responsibility to get permission from consumers to collect third- party information reports (such as motor vehicle records) to agents where the company is responsible for the collection of that information.

The next step with the report, said Jeff Yates, executive director of ACT, is to encourage agents and carriers to pursue implementation of the recommendations in the report in their agreements so the agreements reflect advances in technology. The report, he said, is a tool for agents and companies to use to structure the best possible agreements.

Mr. Yates said there has been no negative feedback to the report. Some carriers have told ACT that they were already in the process of looking at the agreements in order to make them current, before this report came out.

“The report is worth little unless the industry takes it and adopts it,” noted Mr. Yates. “We will continue to monitor [implementation] to see that the industry is responding to it.”

The seven-page report is available at www.independentagent.com.

Reproduced from National Underwriter Edition, June 11, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.