Can An Agency Limit The Types Of Insurance Policies It Will Issue?

The answer to the above question seems obvious. The right of a business to choose what types of products and/or services it will provide is fundamental to the successful operation of a free enterprise economy. If every insurance agency had to offer the same types of insurance policies and/or services, competition among them would be limited to price only. That would result in a race to the bottom and would be disastrous for everyone concerned.
Fortunately, for the most part, insurance agencies are free to choose what types of insurance policies and/or services they will offer to the public. However, there does exist a trap for the unwary with respect to personal lines motor vehicle policies and to a lesser extent, homeowner’s policies. This trap arises from the prohibition on “the fictitious grouping of risks” found in the Georgia Insurance Code.
In a regulation issued by the Georgia Insurance Commissioner’s Office, a “fictitious grouping of risks” can arise when an “insurer, broker or agent” makes a determination on the issuance or renewal of an insurance policy based on the “lack of, lack of potential for or failure of [an] applicant or insured to agree to a writing of additional business, which includes but is not limited to any additional coverages or increased liability limits on an automobile which are not compulsory according to O.C.G.A. § 40-9-37.” The statute referred to is the one that requires minimum liability limits of $25,000/$50,000/$25,000. Thus, an agent cannot condition the acceptance of an application for a motor vehicle insurance policy on the insured applying for any coverages or liability limits that are not required by law. An agent cannot, for example, require an applicant to apply for liability limits in excess of the statutory minimum amounts or to accept uninsured motorist coverage before the agent will accept an application for motor vehicle insurance. The same thing is true for the number of vehicles insured. An agent cannot refuse to accept an application for an insurance policy that covers only one motor vehicle or that covers more than one motor vehicle. The regulation contains eight other examples of prohibited criteria for the issuance or renewal of motor vehicle insurance policies.
As with everything in the law, there are exceptions to the use of the ten criteria in the above regulation. The use of those criteria is permitted if they are actuarially supported, relevant to risk, and based on one or more of the reasonable considerations specified in O.C.G.A. § 33-9-4(7)(size, expense, management, individual experience, location or dispersion of hazard, or any other reasonable considerations). Unless the use of one or more of the specified criteria meets all three of those tests, it is illegal to use that criteria in deciding whether to accept an application for a motor vehicle insurance policy.
There is a similar regulation regarding the issuance and renewal of homeowner’s insurance policies. That regulation specifies seven criteria that cannot be used in determining whether to issue or renew such a policy, unless the above three tests are satisfied. The most pertinent of those criteria for the purposes of this post is the conditioning of the issuance or renewal of such a policy on the “failure of applicant or insured to agree to purchase an additional policy which is not requested by the insured or applicant.” Thus, an agent cannot refuse to accept an application for a stand-alone homeowner’s policy.