If you work for an insurer, guess what…you have signed an Agency Agreement. Do you remember signing it? Do you remember what it says?

If you don’t, you’re not alone. Now that we’re all so used to agreeing to things like “terms of use” for anything from a phone app to expensive software, it may seem like your agency agreement is just another set of legal blah-blah-blah that you have to sign in order to do business. But the truth is there are a lot of important legal arrangements set out in an agency agreement and they could leave you on the hook for a lot of trouble and money.

Virtually every agency agreement includes some kind of indemnification clause or wording that entitles the insurer to demand reimbursement from you, the agent, for malpractice, negligence or action leading to a jury award. That’s not to say that it’s common practice for an insurer to sue the agent every time they have to pay out. But, it is not uncommon for an insurer to pay out on a policy in order to avoid a future bad faith lawsuit only to come after the agent to recoup costs.

So what should you be looking for in your agency agreements? Here are some areas you should understand well and agree with before signing your agreement:

  • Issues of authority (what the agent/broker can and cannot do)
  • Advertising (what compliance is the agent subject to)
  • Waivers
  • Venue (governing law of state)
  • Materials and records
  • Rules & regulations
  • Supervision
  • Audits
  • Commissions
  • Special conditions
  • Indemnification
  • Termination conditions

So what’s in your agency agreement? If you don’t like what it says, it’s worth having a conversation with ‘the powers that be.’ Agreements can be changed. In fact, some companies change or update their agency agreements yearly and ask agents to re-sign. Next time you’re presented with an agreement to sign, take the time to read it carefully and ask for legal advice if needed. You could be saving yourself from a lot of trouble and expense in the future.

Want to know more about agency agreements and how they work? You can find several real-life legal cases in our course #173 – Agents on Trial. Click the link to read the book online for free. Or take the open-book exam and get 20 hours of CE credit. It’s only $38 for 20+ hours of online CE. Get started now.



Just to be clear…Affordable Educators specializes in continuing education. We provide information for educational purposes only. We do not offer legal advice and suggest you seek appropriate legal counsel before making any important decisions about your business.