Letters of Authority and more | NimbleFins' guide to uncommon business insurance documentation

It’s easy to think of correspondence with insurance companies as only a functional or negative thing, but there are ways in which insurers can help you conduct business, and ways in which you can ease your transition from one insurer to another.

Below we have listed some common letters and correspondences you can request or provide to insurers, and the purposes they serve, along with examples.

Tables of Contents

• What is a Certificate of Insurance?
• What is a Confirmation of Cover Letter?
• Cover notes
• What is a Letter of Authority?
• What is a Letter of Appointment?
• Best Practice with Insurer correspondence

What is a Certificate of Insurance?

A certificate of insurance confirms the dates during which your policy is active, along with the amount you are covered up to under the policy. Employers’ liability policies should always be issued with a certificate, enabling you to display the proof of your policy in the workplace as required by law. Note that employers’ liability certificates need only state that your policy meets the required legal minimum, so even if you have a higher level of cover the certificate may not explicitly state this.

When is it useful? A certificate of insurance can be used to prove that you are currently insured and the level of cover you have.

Which policies are certificates issued for?

In addition to employers’ liability some insurers will also offer certificates confirming that you are covered for public liability or professional indemnity insurance. These are often included alongside your policy documentation, normally sent out when you first purchase or renew the policies (you can usually request them any time mid-term). They are a great way to prove to clients that you have a policy in place, so carrying printed copies with you can be very useful when meeting with clients.

Take care when sending these certificates out by email, as although they are usually in PDF format and difficult to modify, counterfeit certificates are sometimes used by uninsured fraudsters. If a client is requesting confirmation of cover by email you can often obtain other forms of confirmation from your insurer, such as confirmation of cover letters:

What is a Confirmation of Cover Letter?

A confirmation of cover letter is a document provided by insurers that can be emailed or posted to you, listing all policies you hold with them, including cover levels and dates. Typically these are provided on headed letters and signed by your policy underwriter or broker as a means of authenticating the document. You can usually request these at any time and obtain an up-to-date confirmation of the covers you hold for provision to your clients.

When is it useful? A confirmation of cover letter can be used as proof of insurance and as a summary of all policies and levels you hold with a broker or insurer.

Example

Terry is offered a contract with one of his larger clients on the condition that he proves he has at least £1 million professional indemnity and £ 5 million public liability insurance in place. Terry calls his insurer and requests a confirmation of cover letter from them. His insurer sends the letter on headed paper, signed by the underwriter for Terry’s policy. Terry can pass this document on as proof he holds the required policies.

What is a Cover Note?

A cover note confirms that a policy is active where a certificate is unavailable or where an extension of existing policies is necessary. Whilst these were common in motor insurance to cover the ‘gap’ between cover starting and a certificate being issued, they can also be issued for almost any other insurance policy where you are required to prove you are covered.

If your policy needs to be extended after the expiration date, or where underwriters are drafting your full policy before issuing full documentation, you may be issued a cover note. The particulars of the note will likely be just the same as a Confirmation of Cover letter, and for some insurers the names are interchangeable. In a nutshell, both documents prove you have cover where full policy documentation is unavailable or out of date.

When is it useful? A cover note can be used to confirm you are insured or prove you have a certain level of cover temporarily where other methods are unavailable.

What is a Letter of Authority?

A letter of authority allows a new insurer or broker to request details from your existing insurer or broker which would allow them to quote or obtain quotes for you. If you are thinking of changing insurer and have already completed the renewal process with your current provider, then you may be asked to provide one of these rather than resubmitting every form and piece of paperwork.

You can typically include restrictions in the letter such as a period during which the authority is valid, or the specific policies you are extending your authority for. Brokers and insurers will usually be able to draft these for you, or provide you with a form to complete and sign which acts as a letter of authority. It’s a good idea to accompany any provision of these with an email in your own words stating:

When is it useful? A Letter of authority can be used to save you the time and expense of completing a brand new set of insurance forms when searching for alternative quotes.

Example

The renewal premium for Karen’s manufacturing plant policy has increased by more than 50% this year after a lengthy pre-renewal discussion and having to complete a new proposal form from scratch. Rather than start the process again from the beginning, Karen completes a letter of authority for another local broker, allowing them to access the same documentation her existing broker has. In this case the new broker is not able to match the terms of her renewal, but Karen now knows she has a competitive renewal quote despite the rates with insurers increasing.

What is a Letter of Appointment?

A letter of appointment is a transfer of responsibility for your policies from one insurer to another or one broker to another. Completing, signing, and returning this document means you are effectively switching insurance provider. These letters are usually short and to the point, stating that you are transferring your policy from a certain date and including your signature.

Be aware that these letters are far more final than a letter of authority, so do not tend to include caveats, time limits or other conditions. If you have been provided with an excellent service level or a competitive quote from a broker after sending them a letter of authority, it’s likely they will then request you send them a letter of appointment to complete the process of switching to them. Again, they will probably have a template for you to fill in, sign, and return.

When is it useful? A letter of appointment is useful for transferring some or all of your insurance policies from one broker or insurer to another.

Example

Richard feels as if his current broker does not fully understand his chemical engineering business. He has researched and found a specialist broker with qualified chemists on staff who understand his business activities and suggest useful changes to his current policy. Richard completes a letter of appointment, transferring his existing policies to the new broker with immediate effect.

Best Practice with Insurer correspondence

Whenever you have questions about your insurance policy you should try to obtain written confirmation of the answers from your insurer or broker. If you store correspondences with your policy documents it becomes that much easier to support a claim or dispute with your policies, especially if claims hinge on some special clause or term that you have previously discussed and confirmed with your insurer.

Example

Kelly is a building surveyor and qualified architectural technician, often providing drawings for small alterations or extensions of buildings she has surveyed. When she obtained professional indemnity insurance the policy documentation was titled ‘Surveyors insurance’. She queried this with her insurance company and they confirmed in writing that the policy covered her architectural technician activities as well as her surveying. Kelly saves the email confirmation to a folder on her computer so that if she is ever claimed against for her architectural work she can easily point her insurer to the relevant agreement.

Additionally, if you keep records of all confirmation or clarification of cover emails you can then forward them on to other clients, rather than going back to your insurer for every request. Make sure that any documents you use for this purpose only name your business and your insurer, to avoid any GDPR breaches involving details of your other clients.

Ombudsman Claims

In the rare event that you are dissatisfied with your insurer or the way in which they have handled a policy or claim, you can rely on relevant saved documents to improve your chances of a satisfactory conclusion to any complaints. This is another reason why keeping a record of agreements or queries you have sent to your insurer or broker is a good idea.

Even if you are unable to come to an agreement with your insurer, you can use any correspondence as evidence in your dealings with the financial ombudsman. Be aware that in order for a claim to progress to the financial ombudsman, you must first have complained to the insurer or broker involved and followed their complaints procedure. If you’re still dissatisfied or unable to come to a solution after following the company’s internal complaints procedure you may then take your case to the ombudsman.

Online Portals

In some cases your clients will ask you or your insurer to complete their online forms confirming you have relevant policies in place and up-to-date. Even if your client asks you to complete these it’s a good idea to contact your insurer and ask if they can either do this for you or walk you through the process. Typically these questionnaires are drafted by insurance experts and can ask questions which your insurer can answer. If your cover is insufficient or incorrect, you are then able to modify it with your insurer then and there.