The issue of underinsured properties returned to the forefront in the wake of the November 2007 California wildfires. Some state officials suggested the problem arose from a “lack of clarity” in contract language and possible “bad advice” to consumers from agents and insurers. So we asked National Underwriter readers what producers and insurers should ethically do to have properties properly insured.
Very few responding believed there was no ethical responsibility for producers to offer advice as to insurance-to-value. On the other hand, no one claimed there was any legal duty to do so, either.
One Illinois producer, while clearly stating there was an ethical duty for producers to advise clients about insurance-to-value, took issue with the industry's critics. “Few agents give 'bad' advice to clients about insurance-to-value,” he said. “Policy language is not part of the problem–no one reads their contracts anyway. How could they be confused?”
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