Endorsement – an amendment or addition to an existing insurance policy that changes the terms or scope of the original policy; a legally-binding amendment to an insurance policy
Obviously, endorsements are common in the insurance industry. The need to pay premium taxes, however, adds a layer of complexity to surplus lines policy endorsements. If an endorsement to a surplus lines policy generates additional premiums, you need to notify the state and pay the appropriate tax amount. If the change reduces the premium amount, the state may offer a refund or credit (which you can apply to future reports/payments) after they process the endorsement.
Endorsement notifications are very similar to original policy filings. The same regulations apply to both. Therefore, you may use the Surplus Lines Information Portal (SLIP) or another state-specific interface, whatever you used for the original policy filing. The only documentation usually required is the endorsement page. You don’t need to resubmit the full initial policy. Depending on the state, you may file the endorsement with the Department of Insurance, Surplus Lines Stamping Office or Surplus Lines Association.
Remember that any filed endorsement should clearly show:
- Name of Insured
- Name of Insurer
- Policy Number (or, if applicable, Endorsement Number)
- Effective Date of Change
- Gross Premium Charged (or Returned)
- Surplus Lines Tax Charged (or Returned)
- Fire Marshal Tax Charged (or Returned), if applicable
- Stamping Fee Charged (or Returned), if applicable
You should track policy endorsements just like you do original surplus lines policies. Whenever possible, file or report them as they bind.
Dates and Endorsements
Generally, the endorsement has its own effective date which must fall between the effective date and the end date of the policy being endorsed. However, you will also need to reference the start and end dates of the original policy. There are a few endorsement types (e.g. extension endorsements, audit premium endorsements) that operate differently, though.
You need to file endorsements for the appropriate filing/reporting period based on the effective date of the endorsement. If the endorsement changes the amount of the premium, you will need to calculate the additional tax amount. Some states require you to use the tax rate in effect when the policy originally took effect. Other states want you to use the rate in effect at the time the endorsement binds. Check with the state to see which tax rate you should use. Be sure to pay close attention to notices from the states between filings. Rules change!
An endorsement should only be filed after the start date of the original policy. If the endorsement arrives at the state before the initial policy, regulators will not have a copy of the policy and will “tag” the endorsement filing.
If an endorsement takes effect after the original policy’s end date, it can also cause issues. You may first need to renew the policy. Then, you can make the endorsement to the renewed policy. Of course, this is not true in every state. Note that in Texas, however, all policy extensions are considered renewals.
Other Types of Endorsements
Certain types of endorsements alter the policy, but do not affect the premium amount. Still, these changes may need to be reported to the state as well. For example, Illinois, New York and Texas require licensees to file non-premium endorsements such as changes to the effective date or expiration date of a policy, name changes, changes of carrier and policy number changes.
Filing an endorsement properly is just as important as handling new or renewal filings correctly, but the rules can be different — so make sure you’re up to date on state procedures.