Acord, Accord, Acccord… but why?

Author: Michelle McArthur

I’m sure you have all seen some version of an Acord form. But why are there so many versions? Why are HFS clients reluctant to accept them sometimes? Why does spell check always try to change Acord to accord?

ACORD is actually an acronym – it stands for Association for Cooperative Operations Research and Development. It’s a nonprofit organization in the insurance industry that develops standardized forms and data standards for communicating policy terms. The idea is that any carrier, with any variation of policy terms, can use a standard form that’s accepted industry wide.

Forms commonly seen:

• Acord 25 – Liability Policies (Certificate of Liability Insurance)

• Acord 27 – Property Policies (Evidence of Property Insurance)

• Acord 28 – Property Policies (Evidence of Commercial Property Insurance)

In a future newsletter, we can dive deeper into the individual forms (I know – you can’t wait!). But for now, let’s keep it high-level. Liability and Auto insurance are evidenced on the Acord 25 form, while Property, Wind, Flood, and similar coverages are evidenced on the Acord 27 or 28 forms.

So why are clients wary of accepting an Acord form?

These forms aren’t actually completed by the carrier. Carriers generate binders/endorsements/full policy documents. Acord forms, however, are completed by agents. This is where it gets tricky! Agents manually plug in the policy data from the binder or policy – as you can imagine, there’s plenty of room for error.

Let’s also not forget the huge disclaimer at the top of these forms:

“THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY”

What this means is while the Acord form is the industry go-to for evidencing coverage, it’s not legally binding and doesn’t guarantee protection. When you consider that the purpose of insurance tracking is to ensure that coverage exists and is compliant, using Acord forms puts all of us in a risky position by accepting a document which may have errors and could lead to a collateral protection gap.

Be Warned! I’ve seen plenty of these forms filled out incorrectly. It’s usually the nitty-gritty of the policy details: deductible amount(s), inclusion of wind/hail, ordinance or law limits, etc. but these are critical to verifying compliant coverage. The details matter!

So, while it’s an imperfect solution, Acord forms have been generally accepted industry wide and largely used in lieu of sending a full policy (which can occasionally take a long time to be issued and could be hundreds of pages!). We do have commercial clients who require receipt and review of the entire policy including forms and endorsements. This is really the best way to ensure that coverage meets lender requirements! Pro tip: The “Acord 75 Binder” is generally more acceptable given the potential for greater legal protection for lenders.

That’s probably more than you ever wanted to know about Acord forms but hey, now you know why we’re so picky!

If you have questions or want more information about Acord forms, just reach out!  

Until next time!

MM

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