This article was authored by Crishana Loritsch, CMCA, AMS, PCAM and first appeared on Quorom Magazine, the award-winning premier publication of the Washington Metropolitan Chapter Community Associations Institute.
"Good morning, Pleasantville Acres HOA. The carrier has issued a nonrenewal notice effective 4/7 for noncompliance with carrier recommendations."
This is not the sort of message that you want to see in your inbox as a community association manager or Board member but unfortunately, this could be your reality if you are not careful to heed the carrier recommendations.
What is A Carrier Recommendation?
An insurance carrier recommendation is a loss-control (risk management) directive issued after an inspection that identifies unacceptable risks or hazards at your business, such as fire hazards, safety issues, or lack of proper protocols. These recommendations are often mandatory, requiring compliance or a written response within a specific timeframe to maintain coverage.
By definition, recommendations are optional but in the insurance industry, recommendations should be understood as requirements.
Types of Recommendations
Recommendations are generally categorized as "advisory," "risk improvement" or "critical." "Critical" items should be given the highest priority with respect to resolution and compliance. However, "advisory" and "risk improvement" recommendations should not be viewed as less important. Rather, these recommendations present potential opportunities to improve your community’s risk profile with the carrier.
These can range from structural improvements, safety and security, policy and procedures related to certain components on the property (i.e., grills on balconies) and employee training. Improving your risk profile may lead to lower increases at the time of renewal.
The Life Cycle of Carrier Recommendations
Loss control inspections typically occur at the start of a new policy or on a set cycle. Once the inspection occurs, all carrier recommendations are sent to the insured. In most instances, carriers expect a response to each recommendation within 30 days of receipt of their notice. It is imperative that you do not delay in taking the appropriate action to remedy the recommendations detailed as you may need additional time to address/and or comply.
What Happens If I Disagree with a Recommendation?
Working closely with your broker allows for another pair of eyes to evaluate your property and act as an expert partner to minimize potential blind spots in your risk management.
If you disagree with a recommendation, it may be in the best interest of your community to comply and implement all recommendations provided by your carrier. Some may be as simple as fixing a few steps or lighting, others could be as complicated as replacing a sprinkler or electrical system (i.e., replacing aluminum wiring, breakers, and panels). Compliance can help address your risk exposure and keep your premiums under control or prevent loss of coverage.
If you believe your existing process accomplishes the same risk reduction goal as the carrier’s recommendation, your broker may be able to work with the underwriters to modify or waive the recommendation. If you agree with the carrier’s recommendation but choose not to implement it (e.g., due to cost), you should still provide a written response to the carrier’s recommendation outlining the existing and proposed processes you have to address the hazard they have identified.
In cases where you unable to fully implement loss control recommendations, you can work with your broker to develop a strategy for responding to the carrier and strengthening existing risk controls.
Best Practices for Handling Recommendations
Engagement with Risk Managers: Discuss findings with the inspector or broker to understand the scope and rationale behind recommendations. In the event something was noted erroneously, provide that information and documentation so that it can be removed from the recommendation.
Proactive Compliance: Implement safety measures, training programs, and documentation to demonstrate to carriers that you are managing risk effectively. This will ensure that your risk remains "attractive" (e.g., renewable) to the carrier.
Verify Requirements: Confer with your broker to understand which recommendations will result in higher premiums versus loss of coverage.
Document Actions: Maintain records of all risk management improvements to show compliance.
Final Thoughts
One way to ensure that you continue to be proactive in your approach to the insurance needs of your communities is to meet regularly with your broker. Committing to regular meetings with your broker demonstrates your commitment to ensuring that your coverage continues to align with the evolving goals and needs of your community and its decision makers.
Managing risk is ongoing and should not be limited to your policy renewal cycle. Carriers want to see your continued commitment to mitigating risk. Carrier recommendations are not meant to penalize your communities. Rather, these standards are designed to reduce the level of risk and prevent future claims. It gives your community the opportunity to highlight what you are doing well and to find opportunities to reduce risk.
