Author: VU Faculty

One of the nice things about being a business owner is that, if a client is abusive and undesirable, you can usually send them packing. There is no legal mandate in most (but not all) states for renewing accounts; however, be sure to check any statutory or legal requirements that might govern in your state. Now, as to HOW you get rid of them....

How might an agent terminate a relationship with an abusive, or otherwise undesirable, client? What legal and ethical considerations should apply?

One of the nice things about being a business owner is that, if a client is abusive and undesirable, you can usually send them packing. There is no legal mandate in most (but not all) states for renewing accounts; however, be sure to check any statutory or legal requirements that might govern in your state. In the absence of any legal restrictions, if the insured is abusive, there's certainly nothing unethical about requesting nonrewal in our opinion.

It's not uncommon for agents to request that a carrier nonrew an account for many reasons. In most states, an account can be nonrenewed for just about any legal, nondiscriminatory reason. In some states, IF the insured wants a reason, they can request it in writing and the insurer has a certain amount of time to respond.

Retaining an abusive client is pointless. If you do the math, you'll probably find that they're an unprofitable client as well. In any case, you certainly have obligations to your employees not to subject them to someone with this type of temperament. We ran this issue by the VU faculty and got the responses below.

Advise the carrier to set up for non-renewal as per "agent's request" and if he doesn't know the reason by the time the notice is issued, tell him.

The agency should "resign" as insurance agent for the insured. Inform the insured well in advance of the renewal that you will discontinue the business relationship and will not provide coverage on their account beyond a certain date.

Include information for the insured to continue coverage with the insurance company if they so desire. That may include a list of other agents in your area (whom you don't like perhaps :) representing the current carrier.

Inform the insured your office will service the policies through expiration, but will not provide any services beyond that point. Send the resignation by registered mail. Then send a reminder by registered mail prior to renewal to reaffirm your action. Notify the insurance company of your actions.

Agents often request non-renewal for these reasons, though a better first step might be to ask the client to find a new agent. The agent can advise the client as tactfully as possible why they no longer want to be their agent, citing specific reasons, the use of profanity, etc. Of course, some behavior can't be tolerated at all, like threats of violence. In some cases it's appropriate to give the client an opportunity to change their behavior.

One agent had a client who came in to the office to pay their high-risk car insurance premiums drunk. The agent advised the client in writing that if it ever happened again, they would have to find other insurance. In another example, a recently divorced client made inappropriate advances to an agency CSR.

Some states do limit the grounds for non-renewal, particularly in personal lines. In those cases, it is generally still acceptable for the agent to refuse to provide service. The refusal should be in writing, preferably sent certified mail, with reasonable time given for the client to find another agent. The agency may want to have the client communicate only with a supervisor or agency principal and should flag the account for "special handling."

Since the policy is a contract between the insured and insurer, you cannot just cancel it, but you can ask the insurance company to give it to another agent. And you can tell the insurance company why you are asking for that action. They may have their own action to consider. You can also tell the client that you will withdraw from the account at the renewal. When you tell most people that you do not want to work with them, usually they leave on their own accord. That has been my experience in getting rid of some clients.

We first need to know whether this is a personal or commercial lines account and what policies are involved. If this is a personal lines insured, you might have to get used to dealing with the insured. Non-renewal laws on personal lines are often very stringent and cause usually does not include being abusive. I guess it is because insurance is expected to make a consumer annoyed and abusive. :-(

If we are discussing commercial lines, your underwriter may have greater latitude. However, Oregon is an example of a state that requires specific reasons for non-renewal. It does carry some tough anti-discrimination prohibitions.

My recommendation is to approach the carrier and see if they can assist in negotiating a broker of record transfer to another agency. Some large carriers may even be able to bring it under a house account management program.