An accommodation line is a form of underwriting that is sometimes provided by an insurance company at the request of a broker or that sells coverage on behalf of the company. This approach normally involves providing coverage to a business or other entity that does not meet the standards set by the company for the type of coverage requested. An accommodation of this type is usually made as a means of preserving a lucrative relationship with the broker or agent who is seeking the coverage on behalf of his or her client.
The use of an accommodation line can occur with just about any type of insurance coverage, including life insurance. For example, a broker who has provided a substantial customer base to the insurance company may wish to write a policy on a new client who does not quite meet the criteria set by the insurer. Rather than rejecting the application and possibly prompting the broker to move his or her account to a competitor, the provider will weigh the risk of approving the application against the financial loss that would occur if the broker chose to end the business relationship. If the risk associated with writing the coverage is considered less than the risk of losing the revenue generated by the profitable relationship with the broker, the insurance company approves the application, thus accommodating the broker.
Depending on the arrangement between the broker and the insurance provider, the broker may receive a slightly higher commission on the policy. At the same time, the insured party may pay a slightly higher premium for the accommodation. This arrangement can sometimes allow individuals and businesses to secure the insurance coverage they need, but are unable to obtain under typical circumstances. As a result, the extension of the accommodation line provides the consumer with what is needed, the broker with a new client, and the insurance provider with an additional source of income.
There are situations in which an insurance provider will not extend an accommodation line. This may occur when the insurance company is convinced that the risk of approving the application is greater than the risk associated with rejecting the request for coverage and possibly alienating the broker. For this reason, the granting of an accommodation line is not a surety just because the broker has a good working relationship with the provider. Unless the insurance company has reason to believe that writing the coverage is in the best long-term interests of the provider, the application is highly likely to be rejected.
