Review company financial ratings and notify insureds of changes. Eighty-five percent of agencies reviewed have no established procedures for regularly monitoring the financial ratings of the companies with whom they place business. Most agencies also do not have a standard procedure for notifying their insureds of changes in their insurers' ratings. A strong argument can be made that agents have a duty to notify their insureds when their insurers' ratings are lowered. Execute contracts with independent contractors.
Many agencies classify producers as independent contractors rather than employees.
However, there often is no written contract between the agency and these producers, and when there is a written contract the arrangement probably would not withstand a close inspection by the IRS without a clear explanation of the producer's duties. In other words, the existing arrangements often do not comply with the generally accepted common law factors of independent contractors as confirmed by the U.S. Supreme Court in Nationwide Insurance v Darden or the IRS 20 Rule test for establishing employment relationship. The majority of audited agencies have at least some producers who do not follow established agency procedures. Establish agency automation procedures. Ninety-five percent of the agencies that are fully automated have no written procedures to assure compliance with federal and state laws regarding the admissibility of their automated data and no standard procedures to audit the accuracy of the data entered into their systems.