Cancelled!

As mentioned in my post "Bike Show Biz",  we talk to a lot of people at the motorcycle shows and are quite often surprised at just how unaware or under-informed some are when it comes to what coverage is available and what that coverage means, not to mention what some of the processes are that when dealing with insurance and how they may affect a policy and/or insurance history.

With the latter in mind, here's a blurb on an process that isn't overly common with us but was brought up a few times by visitors to our booth at the bike shows. Perhaps it's related to the tougher economic times, but regardless, it seemed to be a bit too prevelent and in more than one case our visitors stated that the results had some dire consequences with their insurance.

The cancellation process, and what happens when a client 'misses' a payment.

Legally speaking, insurance is a contract and just like all contracts, there are rules. In this case the contract is between the insurer (insurance company) who offers to provide, for a fee, coverage to an insured (policyholder) who accepts that offer, with an agreement to pay the fee or premium as stated when signing the policy.
The insurer will often take into consideration the "promise to pay" as part of this process, based on history with a policyholder or their relevant credit rating etc. However, if any of the terms of the contract are not met, there is, by definition, no contract.

If the insured does not pay the premium, then there is no contract and no insurance coverage.

Pretty black and white seemingly, but not necessarily so when considering the "promise to pay" concept and some of the possible circumstances.
Perhaps a policyholder forgets to call with credit card info to make that payment, or they are having some financial difficulty based on losing their job in a tough economy, so the payment gets missed. The premise of the 'promise to pay' means that the insurer is still offering coverage despite lack of payment, with the idea that the payment is forthcoming.
Many companies do ask for a down payment when starting a policy, giving them some of the premium in advance and allowing the policyholder a short grace period in which reminders can be sent out and payment issues resolved. Seems reasonable enough, and brokers or agents of the insurer typically resolve these matters before more serious consequences arise.

Of course, sometimes these issues can't be resolved immediately, or at all, causing things to escalate and a cancellation for non-payment to be issued by the insurer.
Again, simple enough and understandable, since who would rationally expect to get a product or service for free.
However, the insurer has been maintaining coverage for the policyholder, despite the lack of payment, on the aforementioned premise of the 'promise to pay'.

The time period for which an insurer is covering an insured and expecting payment from them is called "Time On Risk". 

That period of time which was covered by the insurer is subject to a premium or fee, as set out in the original insurance contract, and payment for that 'Time On Risk' is expected.
Regardless of whether the policyholder wants to continue with a policy or not, or wants to take their business elsewhere, this 'time on risk' has a price and, just to be clear, based on that 'time on risk' factor, if a policy holder had had an accident in this time frame, they would have been covered by their insurer, despite the lack of payment.

Now you can see where things start to get a little grey.

Because insurance history is kept and is accessible by all insurers, including their broker representatives in the industry, any outstanding payments to the insurer must be made in order to continue with setting up another policy.

"Time On Risk' must be dealt with and paid for before more insurance is provided by the same insurer or any other insurer.

Of course, there are some extenuating circumstances that may alter this, adding again to the grey area. What if policyholder John Doe might actually have decided to take his business elsewhere and didn't inform his insurer or broker of this decision. Again, a broker doing his job properly will be looking after this business well in advance, but doesn't always get to speak directly to a client every time there's a renewal that comes up or a change that takes place. And again, that down payment allows for the grace period to sort things out too, but if a client has moved and changed phone numbers and addresses or their e-mail address, or simply just doesn't answer calls or return e-mails or voice messages, then there is a good chance they'll get cancelled for non-payment. Again, this goes on their insurance record, affects their ability to do business in the future, and may even disqualify them from getting insurance until the matter is dealt with, usually making the payment for the 'time on risk'. One alternative for the case is that the insured can prove they went elsewhere and started another policy on their usual renewal date, whereby the insurer can consider that and backdate the cancellation, therby forgiving the "time on risk". If you're like me, it sure sounds like a lot of hassle and wasted time for nothing when a simple solution is to follow a recommended process. We know people's lives do get in the way of day to day business and they may forget to make a payment, or they are embarrassed by their inability to pay their bills because of a job loss or other circumstances and avoid dealing with the matter.  There are even a few people who don't know that a notification to their insurer or broker is a good idea, and there are some who may be angry or upset about something and just don't want to provide the courtesy of informing their insurer or broker of their decision to move their business, The bottom line is that even if you don't wish to talk to anyone or explain your actions, the best and simplest way to avoid problems is to simply put in writing the need to cancel one's insurance, sign it, and send it to the insurer or broker and make it official.