Just in time for Halloween, here’s a little something from the news wires to add another touch of lunacy to the AIG debacle. From the Duluth News-Tribune:

Duluth insurance agency fined for AIG ad

A Duluth insurance agency has agreed to pay thousands of dollars in fines for taking out an ad questioning the financial health of insurer AIG.

 The state Department of Commerce says Wednesday that insurance agent Gregory Brisky agreed to pay a $2,000 fine. His agency, the Dwight Swanstrom Co., agreed to pay a $3,000 fine.

 The department says the agency took out a newspaper ad soliciting AIG customers who might be “nervous” about their insurance company in an attempt to get them to switch insurers.

 American International Group was bailed out last month when the federal government offered it an $85 billion loan during the ongoing credit crisis.

 The Commerce Department says it has affirmed the financial solvency of AIG’s insurance companies, despite the troubles with the parent company.

 It’s against Minnesota law to make misleading statements on the financial condition of any insurer.

 Brisky says he has no comment

I tried to reach the agent to get his side of the story, but had no luck (not surprisingly). What’s really ironic is the same day this little item appeared, pressure from New York AG Cuomo forced AIG to freeze $600 million in deferred compensation for the brain trust of executives that got them into this mess in the first place.

Naturally, agents have to be careful with what they say, or run the risk of violating local law. The New York State Insurance Department, for example, has issued a number of warnings about licensed producers attempting to cash in on AIG’s troubles, reminding them there are laws against:

AA&B’s legal guru Barry Zalma calls the agent’s efforts “a violation of a local law and a stupid attempt to gain business…E&O does not cover, nor should it cover, criminal or other intentionally wrongful acts.” And our “Avoiding E&O” columnist Louie Castoria, an attorney with Wilson Elser, says, “This issue came up yesterday at the Credit Crisis presentation I gave in Portland to the Oregon Surplus Line Assn. The E&O problem with dissing AIG, apart from factual inaccuracy, is that if you play on people’s fears and they swith to a non-admitted insurer, they won’t have the state insurance guaranty fund as a fallback. There are also the usual problems with switching: advancing retro dates, changes in primary coverage that may effect excess layers, etc. In general, a broker should view switching carriers with suspicion, just as a mortgage lender today should be somewhat skeptical of a re-fi. Bottom line: Does it create a material benefit for the borrower?”

However, I can’t say that I blame the Duluth agent for trying to (literally) scare up a little business in the wake of the AIG mess, although obviously one has to stay within the limits of the law. And the story does raise the legitimate issue of how to assuage policyholder concerns during these unprecedented times.

I’d be interested to hear from any of our readers about whether their customers have expressed concerns about their coverage with AIG (or any other insurer, for that matter) and how you’re responding to them.

The global economy may be going to “hell in handbasket” (what a great old-lady phrase, as my teenage daughter would say), but for us ordinary folks, life goes on. We still have to pay bills, do our jobs, satisfy our clients and keep our businesses running as profitably as we can.

That lesson hit home last week at the annual PIIAI meeting for Illinois agents in Springfield. It was a beautiful fall day, so I made the three-hour drive to check out the scenery.

Although national politics was on display–a panel moderated by Bob Rusbuldt featured media savants Paul Begala and Tucker Carlson posturing about the upcoming presidential election–it was the “smaller” issues that dominated the day.

Like every other entrepreneurial business today, Illinois agents are focused on survival. Their numbers are steadily shrinking through M&As and simple attrition. When they can take time away from regular business to attend an event like this, they want to get something out of it that they can bring back to their offices and put into immediate use. So although the undercurrent of national politics, the AIG fiasco and the big federal bailout was there, breakout sessions focused on workaday stuff: med mal insurance, how to hire good people, service fees and premium fund trust accounts (we cover a couple of these on our Web site — check it out at http://www.agentandbroker.com/ME2/dirmod.asp?sid=&nm=Articles&type=Publishing&mod=Publications%3A%3AArticle&mid=8F3A7027421841978F18BE895F87F791&tier=3&Tier4=Web+Exclusive).

However, several issues of national scope are on the radar. PIIAI government relation guy Phil Lackman ticked off the most onerous. Topping the list is controversy surrounding certificates of insurance — a big national concern and a major problem within the producer community.

According to Phil, problems arising from misuse involving the issuance of certificates of insurance — such as client requests to add or change coverage on the certificate — accounted for the largest portion of E&O claims for Illinois agents: 7 percent last year, and as high as 12 percent in other years. Our own beloved Chris Amrhein has written extensively about the problem of relying on certificates of insurance instead of examining the actual policy language. And there’s lots of information on Big I’s educational site at http://www.iiaba.net/eprise/main/VU/NonMember/Certificates.htm

Although some states have passed legislation addressing the issue, most have not been successful, Lackman said. In Illinois, PIIAI got the DOI involved in clarifying that certificates of insurance are evidence of coverage, not coverage itself — and that policyholders can’t add coverage or endorsements through certificates.

I’d be interested in hearing if any of you have run into any “certified lunacy” horror stories involving your clients and certificates of insurance. Feel free to share here!

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