(Every Tuesday, we will discuss elements of insurance through the lens of Terms & Conditions. In this article, we go into Bill Wilson’s book, When Words Collide to look at the deeper and more profound elements of policy wording and implications for coverage and claims disputes)
P&C policy forms come in three basic varieties:
- Standardized
- Proprietary
- Hybrid
There are several “standards” organizations that service the P&C insurance industry, the two most dominant being Insurance Services Office, Inc. (ISO) and the American Association of Insurance Services, Inc. (AAIS). Of the two, with one exception being inland marine forms, ISO forms tend to dominate the marketplace, especially in commercial lines. Most of the examples of modern policy language used in this book come from “ISO standard” forms. Hundreds of insurers license the use of ISO policy forms and subscribe to ISO regulatory filing services for forms and, in many instances, policy writing rules and actuarial loss costs.
Interestingly, ISO forms are advisory and ISO leaves the interpretation of these forms to each individual insurer. That means that, in exactly the same claim scenario, two insurers may interpret the identical language in identical forms unidentically (if that’s not a real word, it is now). Which interpretation is correct? Well, that’s what this book is designed to assist you in deciding. The point is that standardization in policy language doesn’t necessarily translate into uniformity in interpretation…..
Another way to tell whether a form is ISO or not is the copyright notice that usually appears at the bottom of each page in the policy. If a current policy form is an unmodified ISO form, the copyright notice should be one of the following two:
© Insurance Services Office, Inc., 20__
© ISO Properties, Inc., 20__
If it is a modified ISO form, the copyright notice will usually say:
Includes Copyrighted material of Insurance Services, Inc. with its permission
The “Includes” wording in the copyright notice tells you that it is not a pure ISO form. The differences can be minimal or they can be extensive. So, even if you consider yourself proficient with ISO forms, this is a sign that this form needs to be carefully reviewed.
<excerpts from pages 49-50 & 55-56>
About Nicholas Lamparelli
Nick Lamparelli is a 20+ year veteran of the insurance wars. He has a unique vantage point on the insurance industry. From selling home & auto insurance, helping companies with commercial insurance, to being an underwriter with an excess & surplus lines wholesaler to catastrophe modeling Nick has wide experience in the industry. Over past 10 years, Nick has been focused on the insurance analytics of natural catastrophes and big data. Nick serves as our Chief Evangelist.
Nick Lamparelli is a 20+ year veteran of the insurance wars. He has a unique vantage point on the insurance industry. From selling home & auto insurance, helping companies with commercial insurance, to being an underwriter with an excess & surplus lines wholesaler to catastrophe modeling Nick has wide experience in the industry. Over past 10 years, Nick has been focused on the insurance analytics of natural catastrophes and big data. Nick serves as our Chief Evangelist.
