Q: If a client's policy is canceled for nonpayment—whether intentional or not—can a carrier see that on the client's records? Would it impact that client's ability to get another policy?

Response 1: I do not know if insurer systems can see a prior cancellation of a policy. If it's a commercial policy, they might notice a partial term on the loss runs and ask about it. But they would have no way to tell that it was a nonpayment cancellation from the loss runs alone.

However, most applications I've seen ask the prospective insured if their prior insurance has ever been canceled or non-renewed and the client would need to disclose it there. If the application contains false information, it could affect coverage with the new insurer denying coverage or rescinding the policy in the event of a claim when the false statements or misrepresentation is discovered.

If there has been a cancellation or non-renewal, an explanation is typically required. For a nonpayment cancellation, a negative effect would be very likely. It could come in the form of an application denial, increased premium or upfront payment requirements. As always, many details of the cancellation could affect underwriters' views of the insured and the risk involved.

Response 2: I don't know if a carrier could see it. However, many applications ask if there have been cancellations, so the client should not lie and commit insurance fraud. Also, if there is a coverage gap there will be a gap in the loss runs, which are often required for new placements.

Response 3: Just about every application has a question about prior insurance. Providing information about cancellations for nonpayment is fair to the insurance carrier because getting paid reliably is important to its financial stability. Similarly, agencies and brokerages are wise to determine a prospect's insurance and payment history because writing a slow or nonpaying entity wastes valuable time.

Response 4: What does your state dictate? It's likely part of the algorithms for insurance credit reports that were set into motion years ago by carriers.

This question was originally submitted by an agent through the Big “I" Virtual University's (VU) Ask an Expert service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

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