Insurance reform hits Ohio markets

Ohio’s move to enact a law meant to protect consumers and business owners from fraud associated with certificates of insurance transactions is drawing industry reaction

Insurance News

By Lyle Adriano

Certificates of insurance are informational documents that provide a good faith snapshot of the insurance policy coverages of a third party -- but they are fundamentally different than insurance policies.  In many cases, insurance agents supply certificates to businesses, especially when a business must show coverage to secure a contract for an employment opportunity. 
 
Problems arise when businesses demand that certificates show coverages not spelled out or included in the underlying insurance policy. When this happens, the victims are the injured parties who find that work was being done on the basis of a faulty certificate and that no insurance exists to compensate them for their injuries and loss.
 
“Certificates of insurance abuse has been a top concern for independent insurance agents because it puts business owners and consumers at risk,” said Jeff S. Smith, director of government affairs and general counsel at Professional Independent Agents Association of Ohio, Inc. “Independent agents write 82% of commercial insurance in Ohio’s marketplace, and it’s their job to help protect Ohio’s employers. Thanks to their hard work, we were able to develop a much-needed legislative solution to this long-standing issue.”
 
House Bill 259, which takes effect March 21, ensures that businesses are protected and insurance coverages stated in a certificate of insurance can be found in the policy and, if not, there will be consequences. It authorizes the Ohio Department of Insurance director to prohibit any person from issuing or demanding the issuance of a certificate that includes false or misleading information, and also affirms that certificates are not insurance policies and cannot be used to alter, revise, or modify an insurance policy.
 
HB 259 ensures that certificates will be used for their intended purpose and helps prevent their misuse in the marketplace. The legislation makes it expressly clear that agents and businesses who violate the law will be subject to penalties, fines and possible actions taken against their insurance license -- including losing their license altogether.
 
The only parties adversely affected are those who would demand or issue an improper or misleading certificate of insurance that does not accurately depict the underlying insurance coverage. Infractions should be reported to the Ohio Department of Insurance.
 
 

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