When the Insured Asks for a Change to the Insurance Contract: Best Practices
Q. A client asked me to remove coverage for water damage from his insurance contract. After explaining to him the potential consequences of such a decision, I strongly advised him to maintain his current coverage, but to no avail. What should I do to avoid any misunderstandings in the event of a loss?
R. Providing advice goes to the very heart of the agent or broker’s role. Regardless of the platform or the method used to communicate with your client, you must ensure that the client understands what you have told him. To do so, ask him questions or ask him to repeat back to you the information you provided. Although your role is to ensure the product meets the client’s needs, the client may decide to ignore your advice. It is therefore important to scrupulously document all your discussions in the client-file. In principle, the client should confirm his request in writing; however, it is not always possible to obtain such a document.
You must always note the details of your discussions in the client-file, be it steps taken, advice given to the client, or decisions the client made.
Every note in the file must include:
- the date it was written;
- sufficient details to understand the substance of the note, even years later;
- the name of the author.
Detailed notes and thoroughly documented files not only help your colleagues to easily take over the file if need be—they also protect you in the event of a misunderstanding or litigation. If the file does not contain any notes documenting the explanations provided or instructions received, it will simply be your word against that of the insured.
The Written Confirmation
To support you in your practice, the ChAD has created a standard letter that allows you to document requests for changes submitted by the insureds themselves. This standard letter may be used both during the term of the contract and at renewal time.
Having a written confirmation helps to avoid any misunderstanding, should a loss occur. Furthermore, if the client notices that the changes described in the letter do not reflect his wishes, he can quickly notify you.
This new tool is designed only for requests made by insureds. When an insurer unilaterally reduces coverage during the term of the contract, it must provide a rider detailing these changes and obtain the insured’s consent in writing, as stipulated in the Civil Code of Québec, paragraph 2 of article 2405. In such cases, informing the client verbally or even obtaining their verbal consent is not sufficient. To find out more, please read Diminution de protection par l’assureur en cours de contrat. [The Insurer Reduces Coverage During the Term of the Contract, in French only].
To Learn More
For further information on client-record keeping and notes in the client-file, please review the procedure for agents and brokers or claims adjusters. You can also read “The Importance of Proper Record-Keeping.”
 Article 2405 of the Civil Code of Québec: “In non-marine insurance, changes to the contract made by the parties are evidenced by riders attached to the policy.
However, any rider stipulating a reduction of the insurer’s liability or an increase in the insured’s obligations, other than an increased premium, has no effect unless the policyholder consents to the change in writing.
Where such a change is made upon renewal of the contract, the insurer shall indicate it clearly to the insured in a separate document from the rider which stipulates it. The change is presumed to be accepted by the insured 30 days after receipt of the document.”