Avoiding Binding and Late-Submission Violations
March 06, 2013 - IE #005-13
Citizens wants your help to reduce agent binding and late-submission violations!
As you may have noticed, we have introduced a new Binding Violation Notice form. This form reflects fewer and more concise types of violations. During the introductory period for this new form, we will be tracking and communicating violations to agencies for educational purposes only.
If you receive a Binding Violation Notice, it is critical to address the reasons for receiving this violation during the introductory period. We will use the knowledge we gain to develop performance standards and disciplinary action criteria that will be used when the introductory period ends. These criteria will be communicated prior to the end of the introductory period to ensure agents are aware of, and have time to deploy, the office practices necessary to avoid sanctions once the introductory period ends.
It is important that you and your office staff be aware of and avoid the following violation types:
Binding Violation 1: Circumventing the Electronic Document Submission (EDS) processThe agent/agency knowingly circumvented Citizens’ EDS process in ePAS by submitting incorrect, incomplete or unacceptable documentation.
To avoid Binding Violation 1:
Upload correct and complete documentation using the Required Documents window in ePAS. This process mirrors the Personal Lines New Business Submission Checklist.
Binding Violation 2: Ineligible riskThe agent/agency did not submit sufficient documentation to establish that the named insured meets Citizens’ eligibility requirement (for example, no offer of coverage or the 15 percent rule).
To avoid Binding Violation 2:
- Provide documentation of the named insured’s eligibility as required for all Personal Residential Multiperil new-business application submissions to Citizens. Upload to EDS a copy of the declination or the comparable quote to demonstrate that the named insured meets the eligibility requirement.
- For more information, refer to Eligibility as defined in Citizens manual.
Binding Violation 3: Uninsurable riskThe agent/agency submitted an application for a risk that is uninsurable as defined in the manual for that policy form.
To avoid Binding Violation 3:
- Review the completed and signed application and required documentation (for example, photos, inspection forms) carefully for any deficiencies and/or potentially elevated risk exposures.
- Refer to Uninsurable Properties as defined in all Citizens manuals.
Binding Violation 4: Premium posted to an unbound riskThe agent/agency posted a premium on an unbound new-business application prior to underwriting review and approval (This is a violation regardless of the final determination of eligibility and/or insurability.).
To avoid Binding Violation 4:
- Do not accept premium payment for any risk that falls outside the agent’s binding authority.
- Advise the named insured not to submit premium directly to Citizens until Citizens issues a Notice of Approval to the agent.
- If the insurance premium is escrowed, alert the mortgagee not to submit payment until Citizens issues a Notice of Approval to the agent.
Note: Citizens will cite the agent/agency for Binding Violation 4 when premium is posted to an unbound risk, regardless of the source of the payment. Although the underwriting process may verify that the risk does meet eligibility and insurability requirements, that determination will not result in a removal of the binding violation.
Late-Submission ViolationThe agent/agency uploads a new-business application and all required documents later than the fifth business day after the policy’s effective date.
To avoid a Late-Submission Violation:
- Refer to Rule 5: A:2 as defined in Citizens’ Personal Residential Multiperil manuals
- Refer to Rule 108: B.1 as defined in the Citizens’ Personal Residential Wind-Only manuals.
Note: The agent will not avoid any of the violations above by sending a statement of intent to provide required documents later or separately.
Agents who are issued a binding violation notice are entitled to a review of the administering of the binding violation. Agents who seek review of the violation can request the review, refer to Disputing a Binding Violation job aid. The request for review should include a clear statement of why the violation is being disputed. Violations occur at the time that the submitted new-business application is underwritten, based on the documentation or lack of documentation at that time. A binding violation cannot be cured through corrective action taken after the violation occurs.
Binding Violations and Agent Appointments
Disciplinary action for binding violations ultimately can result in suspension or termination of an agent’s appointment with Citizens. It is imperative that agents ensure that they submit all new-business applications correctly, completely and no later than five business days after the policy’s effective date.
Again, please note that the binding violation and late-submission implementation is currently in the introductory period and violations will be issued for educational purposes only during that period. Before the introductory period ends, agents will be provided with sufficient notice of the performance standards and disciplinary action criteria that will be used once that period ends and sanctions for violations are in place.